If it is, I have yet to hear a compelling argument… and I’ve been trying to.

People who are already in the cryptocurrency space and those who are thinking of getting in are right to be cautious of new projects. The space has been rife with scams over its 11-year life-span, from Bitconnect to PlusToken to OneCoin, with billions of dollars worth of assets being fraudulently acquired from those who are seeking fast money by those who lure them in with false promises, disguised intentions, or flat out theft.

So, is the community right to be skeptical about HEX? As with every new project, yes. But, while being wary is wise, not every new project is a scam. A deeper dive into HEX has convinced me that while it does bear a resemblance to some scams of the past, it lacks the actual qualities that would make it one.

HEX Cryptocurrency Logo

Now, just because a project is not a scam does not mean that it will be a success. No one should go all-in on new and exciting cryptocurrency projects. Even great ideas with perfect design may fail to get adoption, and cryptocurrency is one of the most volatile places to put any capital. HEX’s market price may increase, it may decrease, or, like Bitcoin and most other successful cyptocurrencies, it may increase and decrease with wide swings over time; Bitcoin’s market value dropped 85% in the last bear market, but that doesn’t make BTC a scam. If you find a project like HEX interesting, do your research, and decide whether you’d like to allocate some portion of your portfolio to it. Consult an investment professional (which I am not). Be smart, be careful, and do your research. Hopefully this article will inspire you to further dig into HEX and make your own decision; all I can do is share why I have yet to be convinced that HEX is a scam. Take that as it is, and then continue your research.

There are three primary scam accusations that get thrown HEX’s way, probably because they are the three most well-known scam types that are exploited in the crypto space: that it is a Ponzi scheme, like PlusToken; that it is an Exit Scam, like Bitconnect; or that it is a Pyramid scheme like OneCoin. Let’s take each accusation in turn, and find out:

A Ponzi Scheme?

A ponzi scheme is one of the simplest scams to pull in crypto, although its longer-term success depends on the sophistication of the execution. In a ponzi scheme, participants (investors) are told that they will earn incredible returns by investing in the project. In the case of PlusToken the “investment” came in the form of storing your assets using their (custodial) wallet; they promised that by doing so, your holdings would grow massively thanks to their own mining, trading, and investments. How is it a scam? Because the promise of growth is of a scale that is impossible, and can only be paid out to early investors by using the investments of those who join later. If there are a finite number of people in existence with a finite number of assets, a ponzi scheme is unsustainable, and a lot of people end up holding empty air.

Is HEX a ponzi scheme? Well, let’s see how participants are paid. In the case of HEX, the currency supply increases at a rate of 3.69% every year; that is programmed into the smart contract. Those who hold HEX have the option of staking their HEX to the smart contract and earning a share of that supply inflation (along with a share of any penalties that are paid into the pool by those who end their stakes earlier or later than they specified). The longer and bigger you stake, the more shares you get in the pool, and the larger share of the HEX inflation you receive.

The only promise made to stakers is the rules in the smart contract (that everyone can read on etherscan, and that are well-described in the Layman’s guide), and the amount of HEX returned to stakers is minted when they end their stakes, as defined in the smart contract code. No one who stakes their HEX has their HEX used to pay earlier stakers (in fact, when you stake HEX it is burned, and when you end your stake it is re-minted), and no one is paid for staking HEX in any other form than HEX. No promises are made other than the contract code, and no one’s investment gets used to pay other investors.

Verdict: No, it is not a ponzi scheme.

An Exit Scam?

An exit scam is when a person or company accepts investments while making promises about the future and how those investments will be spent to benefit investors; before those promises are fulfilled, however, they run off with the invested funds and never deliver on the promises. An exit-scam might be the end-game of a ponzi scheme (as was the case with BitConnect), or it could just be based on promises of building the “next big thing”. The summer of ICOs in 2017 might, with nearly as much accuracy, have been called the summer of exit scams, though the practice certainly didn’t end then. It is such an easy scam to execute that it will probably plague the cryptocurrency space long into the future. Thankfully, the SEC has been prosecuting those it can who have run exit scams in the past years.

Is HEX an exit scam? Well, one could be excused for thinking so, as this is (thanks to poor reporting) one of the things that people actually think they have evidence for, in the behavior of the HEX smart contract’s Flush Address.

In HEX’s launch phase (the first year), there are a few ways to get HEX. One of the ways is what the project calls its “Adoption Amplifier.” With the Adoption Amplifier, each day a certain number of HEX is put in a bucket and, and the end of the day, is distributed to participants (this is similar to how EOS ran its initial distribution). To participate, someone simply needs to send ETH to the contract function; at the end of the day, in return, the HEX in the bucket is distributed among participants based on what portion of that day’s ETH was sent by them. If half of the ETH entered into the Adoption Amplifier for a given day came from me, then I get 50% of the HEX in that day’s bucket when I exit the lobby at the end of the day. The amount of HEX and ETH in the pool is available to see all day long; nothing happens behind the scenes.

The ETH that goes into the Adoption Amplifier is sent to an address, the “Flush Address”, defined in the HEX smart contract, and that’s that. What does the flush address do with it? Don’t know. Why don’t I ask you what do you do with your ETH? There’s no reason why I should think you would or should tell me. The moment the ETH is sent to the Adoption Amplifier, it is in exchange for the shares in the Adoption Amplifier pool and HEX at the end of the day. Asking what the flush address does with its ETH is as silly as me asking what the cinema does with the money I give them in exchange for a movie ticket. When I exchanged the money for the ticket, the money ceased to be mine.

I think the reason people are initially dissatisfied with this is actually the reason they should be relieved by it. In the summer of ICOs, the ETH that would be sent to a project was expected, and promised, to be used for some purpose like building the product. In the case of HEX, it is the exact opposite. The only thing that HEX is or ever will be is the smart contract that defines the rules of the token. It was complete the day it launched. There are no future promises or expectations. If there was an “exit,” it was at the moment the contract was committed to the Ethereum blockchain before anyone put any money into it. The fact that we are so wary of projects that make promises of what they will do with Ether is the very reason we should be so relieved that HEX doesn’t, and can’t, do that. The contract is not changeable; there is no further development expected or needed. I don’t have to worry about the ETH being abused because whatever the ETH is used for has no more effect on me than what you do with your ETH has.

A few weeks ago when a large portion of the ETH at the flush address was sent out to other addresses (in stacks of 1337 ETH each, hearkening back to nerd culture along with, more specifically to crypto, the final rate at which ETH could be bought with BTC during its own launch phase), many people in the cryptocurrency space cried, “EXIT Scam!!!” Those who have been participating in HEX, on the other hand, who understood everything I just outlined, shrugged their shoulders, not caring what happens with the ETH, because why would they? The project is already complete, and the ETH ceases to be theirs when they use it with the Adoption Amplifier to acquire HEX.

Verdict: No, HEX isn’t (and can’t be) an exit scam. Since the contract is complete and deployed, there are no promises to leave unfulfilled on any sort of “exit”.

A Pyramid Scheme?

This is perhaps the longest reach of all of the accusations. In a basic non-pyramid affiliate program, like the ones that Amazon, Uber, andHEX’s smart contract have, I am incentivized to refer my friends because I get some bonus or compensation by doing so, and it costs me nothing to be involved. These are fine, legal, and effective! In a pyramid scheme, however, it is stacked like a multi-level pyramid, members generally have to pay to join (and to stay members), and often there is no product other than the referral system itself, where people pay to be members for the privilege of being able to refer others; the referral structure has multiple or infinite levels (which of course fails unless you have an infinite number of people who can join). So if I join a pyramid scheme and I refer someone, I get compensation based on that referral, along with any referrals they make, and along with any referrals their referees make, and so on. We’re all affiliates, and the ones at the top of the pyramid get all the money, the people at the bottom get screwed by paying to be members and earning little or nothing for lack of people (or time) to refer on their own.

With HEX, the referral program only lasts for the first year launch phase, there is just one layer of referrals (programmed into the smart contract) and you don’t have to pay to participate; I get HEX for people I refer when they free-claim from Bitcoin or participate in the Adoption Amplifier, you get the same for the people you refer. It is one-layer deep, and the bonus is paid in HEX according to the rules of the deployed smart contract. The product is HEX, which has all the same functionality as cryptocurrencies like Bitcoin, the security of the Ethereum Blockchain on which it is built, and the additional ability that HEX can be staked in order for the amount of HEX you hold to grow over time. It’s like Bitcoin hodling, but with growth programmed in, and it is already 100% complete and ready to use today.

Verdict: No, HEX is not a pyramid scheme.

Ok, so if HEX isn’t a scam, why do so many influencers in the space enjoy calling it one? I give people the benefit of the doubt: HEX has qualities that make it appear at first glance like some of the well-known scams. Upon investigation of each item though, as we have done above, it clearly doesn’t fall under those umbrellas. What has struck me most is how much influencers are uninterested in investigating a project before calling it a fraudulent endeavor. It seems to me that someone who has a following in the space should be more careful with their judgments. None of us has the time to investigate every new project, so I wouldn’t ask that of anyone. But if you aren’t going to investigate something, don’t say with conviction something that you have not confirmed on your own. Verify for yourself, don’t trust others who may not have put in the time to investigate on their own, because in the case of HEX, they haven’t.

StakeHEX.com Community Logo

Like I said at the beginning of this piece, I really have been trying to find a compelling argument that HEX is a scam. I spent the past ten months of my life building the StakeHEX.com community, the HEX simulator, and the HEX Tool smartphone app (a collaboration with some other members of the community); if HEX is a scam, I’m the first person that wants to know. I offered on Twitter to join anyone’s stream to discuss HEX more with them if they’re concerned that it is a scam, in the interests of finding out for myself if it is, and I was met with silence from those who otherwise are telling thousands what they think they know about the token (although, credit to the BitcoinSV Channel for taking me up on it and hosting a conversation). But why has everyone else ignored my offer, even when so many have retweeted it to their thousands of followers, tagging influencers all along the way? If you’re convinced that HEX is a scam, stand by your conviction and talk to someone who knows HEX well and let’s find out, together, if it is. If you are so certain that you’re right, convincing me should not be too difficult; just share the evidence and analysis that led you to your conclusion. If you’re right, you’ll have saved me, and many of your followers, from a scam. Until then, I’d suggest that you be more prudent in your condemnation of innovation.

So, why does someone like me see usefulness and value in HEX, and the potential for market value to increase?

Trustless growth through staking over time. Certificates of deposit are one of the most popular banking services in the world, and HEX offers similar functionality without counter-party risk or the need for trust in ancient institutions: i.e., the promise of cryptocurrency applied to one of the biggest banking services available.

A currency where future tradeable supply is predictable based on the public information about when stakes are ending. As more stakes are opened, fewer HEX is available to be traded, and since all the information is available on the blockchain regarding other active stakes, you can plan your strategies accordingly.

An active community building awesome stuff. Check out hex-data.com, hexstat.com, hex.vision, hexinfo.io and more, websites created by a community members with charts and data about current stakes, ended stakes, HEX claimed, and much more. If you want to simulate the HEX cryptocurrency and see how claiming and staking works, and how much growth is possible within the token, see the HEX simulator I created at StakeHEX.com/simulator.

Free HEX claiming for BTC holders, and the Adoption Amplifier for those who want to get in with ETH, or the ability to use decentralized services like Uniswap at swaphex.com to purchase HEX directly with ETH and other tokens. Learn more about how you can get HEX at StakeHEX.com/walkthrough.

If you want more information in general about HEX, there is information available a StakeHEX.com/about-hex or the official HEX website at HEX.win.

For a 10% bonus on any HEX you claim with BTC or acquire for ETH through the Adoption Amplifier, visit HEX.cm.

Disclosure: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. Paul Hughes holds some HEX and is the founder of StakeHEX LLC and www.StakeHEX.com. StakeHEX is not affiliated with Richard Heart or the main HEX website.