You may strongly dislike the HEX token, it is definitely a controversial topic. However, like HEX or not, like the egomaniac Richard Heart or not, HEX is outperforming every other crypto-asset in the entire top 100. HEX moved from the 3000s in ranking to the 31st cryptocurrency in a few months and while even top cryptos have been experiencing spikes to the upside and the down, HEX has mostly remained up and only kept going higher.
There are people trying to make claims about HEX being a scam or claiming that there is a lot of market manipulation. What you have to remember here is that many legitimate projects have been called scams, shitcoins, ponzis or manipulated markets. EOS is today considered a legitimate project, however, because of its ICO auction system (which is very similar to how HEX tokens are acquired) people tried to claim that its price was manipulated. It also sold its tokens before there was a functional product, resulting in penalties by the SEC.
There was no clear evidence that the EOS token auction was or was not manipulated, but due to the fact that the auction system was centralized in a sense, that the funds went to a specific entity, it was believed that the bids were not accurately indicating the value. The reality is that there is no hard evidence that any manipulation happened and its really just conspiracy theories flying around.
The same sort of conspiracy theories have been told about HEX, and I personally followed the wallet addresses to see if the 'evidence' was clear. It most certainly was not clear, and without a court ordered warrant there is no way for anyone but the exchanges to know. The trail ends with the exchanges and what happens to the ETH in the exchanges is not clear at all. Like with EOS, we can only make guesses about what happened to the funds.
Many people are familiar with the hot-button topic related to Steem, a blockchain that everyone considers to be legitimate. People might argue that it is now centralized, or that its DPoS system proved to be a broken design, but most would not call it a scam or ponzi scheme. However, in its early inception it was called a scam and a ponzi despite the fact that it was a fully functioning blockchain with a clear applicable use case.
So, then, why did it get called those things? Mainly because of two reasons: 1. The founders had many more tokens than everyone else, 2. The staking system was long and people suggested the idea that the locked tokens allowed the founders the ability to slowly exit while everyone else is stuck.
Here's the thing, when you put in hard work and risk a lot of money to create and bring adoption to an application, you don't want to do it for free. Its unreasonable for people to think that founders should not get a large initial cut of the supply. If they don't get some kind of edge on the early supply, what incentive would entrepreneurs have to advance the decentralized application ecosystem? Rationally, founders of projects should either earn from selling the asset they created or receive a perpetual fee on the use of the application. Personally, I'd prefer them to receive a large initial sum that dwindles over time rather than an eternal royalty on all activity in the dapp.
This is an interesting complaint against HEX. There is some truth to it. First off, there is a founder address that receives HEX token bonuses when people free claim HEX tokens if they owned bitcoins during the snapshot period. That founder address also receives HEX tokens when people refer others for referral bonuses. The estimated percentage that this founder(s) address might receive very possibly could be as much as 45%, plus that founder address gets all the ETH from the 350 day auction. There is more! That founder address also receives 50% of all penalties incurred by people doing an emergency unstake to get their HEX tokens out sooner than they agreed to do.
Does this sound unfair and unacceptable? Well, hold on a minute, if we compare HEX to other projects it might not seem quite as centralized as you might think at first. For example, BAT is viewed as a cool, popular new cryptocurrency that has value and uses, but the founders received all the ETH from its ICO just like the HEX founders receive all the ETH from its auction. The founders also kept a large amount to compensate employees for future development and other funds. The initial supply of all the BAT that would ever exist was completely under the control of one entity.
The same can be said for XRP, despite the fact that many people believe in that asset and it ranks high among cryptocurrencies. The same can be said for MKR the token of the MakerDAO dapp. The founding company owns the vast majority of the token and choose not to vote on governance but have it within their power to do so if they felt the need to do it. Clearly, HEX is not the first, nor will it be the last cryptocurrency to give the founder an initial advantage.
The main concern people might have could be with the 50% earnings of the penalty fee on early unstakes. This does provide a complex economic variable that we should think about carefully. However, we need to keep in mind that many founders of decentralized applications such as Uniswap realize that having a perpetual fee is a good way to reward founders for their work. Will the earnings from the penalties be exceedingly large?
I suspect it won't be. Last time I did the math, the accrued value of penalties was a mere 0.25% of total supply, which is quite small, and the founders only get half that. So, is 0.125% founders royalty on a DeFi application really that terrible? I think not, and I think it could get smaller over time as people realize that they should stick to the agreed amount of time for staking. And if the founders ever unfortunately lose access to that wallet or don't pass the keys to descendants those penalties might end up causing the supply to be deflating, which could only be good for the future price one day.
The same feature that causes some to be concerned is also HEX's strength. The pandemic has devastated the economy and caused many to be without a regular income they can depend on. This impacts the cryptocurrency market as miners, traders and even long-time holders of bitcoins and other crypto-assets rush to US dollars during this USD deflationary period. USD is still king for paying bills.
However, HEX does not work like Bitcoin. Bitcoin's inflation is 100% allocated to miners that have many operating costs they need to cover by selling BTC, while HEX allocates all of its inflation to passive investors. This gives HEX an edge in a bear market because the token is not being dumped on the market to cover expenses. In fact, its quite the opposite! If the passive investors staking HEX buy into the FUD and choose to unstake their HEX before the time they agreed to have their HEX locked up for they pay a penalty fee, which could be large.
This means that holders of HEX tokens are incentivized to be patient and not buy into the FUD. They have more than just an incentive to not buy into the FUD, because the stakers that do not "emergency unstake" receive a share of the profit from penalties incurred on those that do unstake due to FUD. This means that by staking and patiently waiting for the lock-up duration to end you can earn even more than the interest rate but also a bonus from penalties to those not keeping to their agreed lock-up duration.
We can see that HEX is doing very well while other crypto-assets are experiencing much less certainty in valuation. Clearly, HEX is showing that it was designed to effectively work as a true Store of Value during tough times. This is because those trying to dump their tokens, which lowers the value of the token, first pay a hefty penalty fee resulting in less capability to dump the price. Additionally, those that can be patient have stronger incentives to wait before selling their tokens than you can find in most other crypto-assets or real world assets used for storing value.
HEX has the potential to actually be a stable currency sooner than nearly all others. Investors are attracted to assets that bring in at least 5% interest, which is theoretically possible with HEX even when 74% of the supply is locked up. So HEX can become highly lucrative for passive investors, driving up demand while shrinking supply as people buy up HEX tokens to stake for a year or more.
In the HEX ecosystem you can view when large stakes will be able to unstake. This is valuable because holders of HEX are likely to plan their stakes on different times from others in order to sell their tokens at the best price they can. For HEX this means that people can more easily predict the circulating supply and corresponding future value of HEX compared to other assets. We could see HEX maintaining a very regular circulating supply if investors maintain a consistent 74% staked to 26% circulating ratio in order to keep earning a 5% ROI.
Unlike all blockchains that must devote inflation toward rewarding miners or validators for securing the blockchain, HEX has no such operational costs. All of the 3.69% annual inflation goes directly to passive investors, which offsets any buying power loss usually experienced for inflationary currencies as most holders of the token receive the inflation. And the inflation rate of 3.69% is well within normal ranges of inflation and is fixed, likely preventing both excessive inflationary or deflationary effects.
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