Classic ponzi scheme definition is correct. But anything that promisses gains without having something concrete to back these gains can be called a ponzi scheme.
Well, that might be a casual use of the word ponzi that one might use, but its not the correct use of it. For example, if you were to apply this definition of a ponzi to a cryptocurrency it would be applicable to many blockchains such as Bitcoin, Bitcoin Cash, Dogecoin and really any blockchain that is only used as a means of exchange. In fact, that is precisely the argument that Peter Schiff makes against Bitcoin, calling it a ponzi, as many no-coiners also call it.
"But Bitcoin has USE!!! It can transfer value from one place to the other side of the world!!!"
Yes, but Bitcoin is only valuable if enough people keep agreeing it is. You can't build something with Bitcoin, you can't eat or use bitcoins in any way other than means of exchange. Its nothing if people don't agree it is something. HEX is precisely the same as Bitcoin in this way, nothing more than a digital record of numerical totals that can be moved around the world, the same as most blockchain native coins and ERC20 tokens.
HEX is an idea that you could build a currency on Ethereum, which the founders of Ethereum actually did intend. The idea behind HEX is simple, it aims to be an international currency just as Bitcoin does and a store of value just as Bitcoin does and the reason it is suggested to be useful in this way is that it was designed with game mechanics that reward people for locking up their HEX, which in theory will result in scarcity.
Could it fail to be substantive to work? Sure, maybe, but the idea is interesting. Bitcoin and Ethereum are forced to reward people securing the blockchains, but what if you had the security automatically? Then you could reward other types of behaivor. HEX was designed to reward actors that do things deemed more beneficial for its internal economy. Its a money play.
A ponzi is called what it is because it has a very specific feature of it, which is that return on investment to early participants comes from later participants and not from any real value. But a lot of kinda worthless shit gets appraised for stupid amounts of money.
A sucky Nintendo game that no one enjoyed playing as a kid went for $80K in one auction. A car that was known for having a manufacturing flaw that tended to cause the car to catch on fire and burn the driver alive sold for $3 million dollars... Do things have to have a "concrete" utility to have value? Fuck no...
Here's the problem with applying that to a cryptocurrency. It makes sense to apply that to Bitconnect because it literally couldn't pay you the interest it promised forever, there would be an end and it was destined to be an ugly end.
HEX is a smart contract that rewards you not with USD, BTC or ETH but more HEX when you stake it for a set amount of time and do not unstake too early. So, you cannot fail to get paid what you are promised.
The dump argument would not apply because I already explained how dumping is strongly discouraged in HEX due to how much more you are rewarded to stake when everyone else is staking.
Comparing it to Bank Deposit certificates makes no sense. BDC have a whole financial and regulatory structure behind it that make the system solid enough to provide some guarantees to investors if shit hit the fan. HEX is just a promisse that it will work.
HEX promises you that if you stake HEX you will receive more HEX at the rate of between 3.69%-369% depending on how many people are staking. If 99% of the HEX is being dumped on exchanges for BTC/ETH/USDT then the 1% still staked is getting a 369% interest rate. This design motivates people to not have their HEX sitting on exchanges but staked, increasing scarcity and likely price.
Its not promising you more USD, BTC or ETH, it is promising you more HEX and it can always fulfill this action.
Inflation isn't value increase. It is value decrease. The value of something increase only if there is real demand for that something. Demand based on supposed gains without something solid to back it up is just speculative demand that can bring short-term profits but don't buid value.
It is experimental for sure. But think about this, why is inflation a negative to people? Because they are not the ones getting the inflation. If you were getting the inflation than you would be richer and when you're the one getting hit by the inflation you would be getting poorer.
This is why my post brings up the Steem blockchain a lot. You are on the Steem blockchain, so I imagine you don't see it as a scam. Yet, its whole reward system revolves around inflation. Similarly, HEX does this too. In fact, all blockchains use an inflation system, including Bitcoin, to motivate certain participants to perform some action believed to be beneficial to the network. HEX does that with its inflation, rewarding those that lock up their tokens for longer, and discouraging those keeping their HEX liquid. Steem does precisely this very same thing.
"So why is HEX not a scam? Because its code is available for the whole world to see". Well, Jordan Belfort (the wolf of wall street) operated years on daylight before it could be proven that he had a really elaborated scam. Having a open-source code isn't an argument that it isn't a scam. It's just a scam that want to appear as a legit and trustfull project.
Here's the problem with that argument, we know the attack vectors. The founders of HEX can't undo the smart contract, it exists how it does. It also went through 3 auditing companies that verified its economics. You can find those auditing companies by going to Hex.Win the website and checking the "Tech Specs" page.
The code can be checked for malicious techniques. The ways in which the founders get rewarded are obvious, they are getting both large amounts of HEX and ETH right now. But after the first year, the founders only get 50% of the penalty fees when people do an emergency unstake, unstaking early than they agreed to do. To me, that is very fair, most people will not unstake early, and founders should get something for their trouble.
Still about open-source code: How many people do you know have the ability to properly understando the code? I can't. I have to choose to believe in someone that can. Also, how many people attracted by the possible "amazing gains" will care about reading the code?
There were 3 audits by well known thirdparty auditors. They won't like for a dapp. You can check out their reviews and I mentioned in a response above.
And about shitcoins... every coin is a shitcoin until someone believe it isn't.
Very true. However, given the incredible success of HEX so far, especially with all the naysayers out there that call it a scam before looking into it, I'd say HEX already passed that threshold.
But I will say this, I'm way more into Ethereum than HEX. To me HEX is not the be-all-end-all of crypto. Its just an ERC20 with interesting game mechanics that I think will eventually be seen in the top 100, potentially earning me a nice ROI.
What drives me to debate with people on HEX is more that people discount it without really hashing out its details. No, its not the cure to cancer, but like Steem its a fascinating economic experiment.
I hope you enjoyed reading this book. ;)
RE: "HEX is a Scam! HEX is a Ponzi!!! HEX is a Shitcoin!!!!!"