HEX Project: Why it’s a Good Idea to Stay Away
The HEX token, deriving its balance from a Bitcoin (BTC) snapshot and deposits of Ethereum (ETH), is seen as a potential scam.
The HEX project, previously known as Bitcoin HEX, launched this December 2, and quickly raised skepticism among the crypto community. The HEX token, envisioned by Richard Heart, started with an airdrop, and allows for the creation of more tokens in exchange for Ethereum (ETH).
The token, overhyped as the solution to both BTC and ETH problems and limitations, also uses an elaborate system of staking, which brings a competitive element to minting. In some sense, HEX resembles schemes like BitConnect and ETHConnect, where established coins are deposited, and another type of asset is issued.
The appeal of HEX started with the snapshot on December 2, which awarded tokens to all BTC holders, with the right to stake them. The only exclusion is for the Mt. Gox wallet, as well as Satoshi Nakamoto. Otherwise, all wallets, large exchanges and unknown “whales” can claim HEX and stake it.
HEX claims to be the first crypto-based “certificate of deposit”, a common banking product which bears interest. But the interests in the case of HEX are huge, far outpacing bank deposits. To generate HEX, users are asked to store valuable crypto in a smart contract - including ETH and BTC. The token itself is yet to enter price discovery.
The HEX smart contract is indeed the top gas burner on Ethereum. Generating the token uses up 15.42% of all gas, ahead of the Tether smart contract.
But the scheme has existed for only a few days, and it is yet to be seen if HEX will have an impact on the entire crypto sector. For now, staunch proponents are sending ETH into the smart contract, despite warnings.
The HEX token resembles other schemes where the final earnings depend on selling the actual token. Similar token generation events happened on the EOS and TRON networks, and have not stopped yet. But this time, instead of using network resources, generating the token requires actual ETH.
The project’s hype page encourages users to hand in “cheap ETH” for an asset where “the price can only go up”. However, nothing ensures the actual price of HEX, and the scheme remains extremely risky. Even claiming HEX linked to a BTC address may lead to mapping the network, generating fears the project may have other unforeseen effects.