Cryptocurrency traders and investors are constantly looking out for the next big thing. One thing learned from the 2017 pump is that FOMO can spread like wildfire and a crypto asset can surge for practically no reason. HEX is getting a lot of attention at the moment but all may not be what it seems.
Cryptocurrency Community Vexed by HEX
The project describes itself as a blockchain certificate of deposit (CD), similar to a fixed deposit interest paying service traditionally offered by banks. Outspoken project founder Richard Heart has been extremely vocal lately the platform has generated quite a bit of criticism and controversy.
It has been described as a colossal pyramid scheme with questionable ethics. Essentially token holders will be able to re-stake them for potentially huge returns in terms of interest depending how much of the total supply is staked.
Heart has vehemently defended his baby by attacking the banks and bitcoin alike. HEX went live last week but the majority of transactions on its contract have no monetary value, presumably because the snapshot gave the initial cryptocurrency away for nothing.
Just like a pyramid scheme, HEX has an elaborate referral system which is likely to enrich those at the top, namely the founder. It claims that this will continue for 50 weeks after which all of the tokens ever created will be distributed.
To get HEX, participants can buy it sending Ethereum to a so called the ‘Adoption Amplifier’, which functions as a recurring daily auction. They are effectively trading ETH for HEX though, no matter how it has been worded.
There is another way of getting them and it involves revealing how much bitcoin a participant holds by storing it in a wallet address to receive 10,000 HEX tokens per BTC held.
At the moment there is no price data on the tokens which have only just started circulating.
Enriching The Owner?
Lawyer Stephen Palley has questioned the use of the certificate of deposit to describe the scheme noting that it does not return the ETH investments.
Here’s the thing. A CD (which is what Heart says Hex is) is a certificate of DEPOSIT. You get the money back, after interest is paid. This guy is calling something a CD that doesn’t give you your ether back. It is a CD only in the sense that it is deposited elsewhere. https://t.co/ai6VLMltGf
— Palley (@stephendpalley) December 10, 2019
In an article on The Block, Palley elaborated with this analogy;
“Imagine a bank CD where you get sand in exchange for dollars, and you can use the sand to get extra sand but you never get your dollars back?”
Fellow attorney David Silver pledged his support to the interviewer Peter McCormack and his questions on the disappearing Ethereum.
A recent medium has also delved into the project revealing more details on how wealthy Richard Heart will become if this token launch is a success. When ETH is sent to purchase HEX it actually goes to something called the ‘origin address’.
In tiny print on the contract document, and hard-coded into the protocol, is a clause which gives the origin address, owned by Heart, a ‘copy’ of all bonus payouts meaning that it will eventually own almost half of the entire supply of HEX.
The report continues to claim that Heart will likely make over $100 million in ETH and control 45% of all HEX after the first year. There are also a number of penalties for not staking or prematurely ending the contract, with 50% of those penalty fees also going into this ‘origin address’.
The bonus and referral schemes seem to have been articulated to obfuscate the premise that the entire platform has been cunningly designed to make one man very wealthy indeed.
Image from Shutterstock
The post This Cryptocurrency is Causing Controversy as Community Calls it a Scam appeared first on NewsBTC.