Where does Hex's INFLATION come from? is it a scam??
Updated: Nov 4, 2022
Where does HEX’s Inflation come from?
Before we dive into this let’s look at Bitcoin. Is Bitcoin an inflationary Coin? Yes, until around the year 2140. The year 2140 is when the last block reward will be able to be mined, so until then Bitcoin has an inflationary supply.
In the first few years, Bitcoins Inflation was astronomically high in comparison to what it is today. But how is there inflation at all? Inflation simply comes from the design of Bitcoin. It is paid to Miners as a reward for upholding the network and doing the “Work” it takes to solve the cryptographic puzzle.
The first Bitcoin halving occurred on Nov. 28, 2012, after a total of 10,500,000 BTC had been mined. The next occurred on July 9, 2016, and the latest was on May 11, 2020. The next is expected to occur in early 2024.
- Investopedia.com
The rewards were pre-programmed into the code to be paid to Miners. This means the supply of Bitcoin will inflate over time until it reaches its maximum supply of 21 Million, at which time there will be a capped supply. The final rewards/inflation will be rewarded somewhere around the year 2140.
To really round off what is happening under the hood, Bitcoin’s supply inflates over time – which happens by Miners Validating blocks and earning BTC as a reward. Miners then have to pay for their power costs, which means that in some cases miners may have to sell these rewards in order to pay for the ever increasing cost of Validating blocks. This means that miners are incentivized to hurt the price of Bitcoin. So, the inflation gets paid to users who may need to sell it to pay for the cost of earning those rewards.
Let’s look at HEX now. Where does HEX’s inflation come from? Like Bitcoin, Hex’s Inflation comes from the code. Hex is immutable and cannot be altered by anyone for the benefit of anyone, ever. Every year, the Hex supply inflates by 3.69% to those who “stake” their Hex (more on that later). No matter if there is one user who Stakes Hex or 1,000,000 users, the supply will inflate and be paid to those who “stake”.
Like how Miners are paid rewards in BTC for Validating the network, Hex Stakers are paid daily rewards for promising not to sell their tokens for a given period; Between 1 and 5555 days – or 15.2 years. Staking, is the promise to the Hex code. Once Staked, users will be paid a certain amount of the total inflation based on 3 parameters: How many Hex they stake, how long the stake is for, and the percentage of total Hex staked of the total Supply.
Once Hex is staked, it is given a T-share value that determines how much you and I get daily. Currently, the daily payout for one of these shares is around 6.2 Hex per day. How did the system get this number though?
The cost of staking for one of these shares(T-shares) goes up over time in a similar way to how Bitcoins rewards are halved over time. As stakes end, the amount of Hex it takes in order to stake for a T-share goes up. In the beginning of Hex, it only cost 10,000 Hex to Get paid whatever the daily payout was at the time. Currently, due to many stakes having ended, the Share price now costs 22,771 Hex. While I may do a more comprehensive guide on the T-share later, I will just quickly summarize what it is. The T-share is a mechanism that only is activated at the time of staking and is used to determine how much of the total daily Hex inflation you will get. It does not “exist”, and you can’t technically buy one. It’s kind of like having a share in a company that expires after a specified number of days which you have determined and pays dividends over that period. Roughly. Now let’s talk about how the system calculates the inflation payouts. If 100% of the Hex supply is staked, then the average payout for an average length stake would be 3.69% APY. If only 10% of the total Hex supply is staked, then the average payout would be 36.9% APY.
If you stake for longer or shorter than whatever the average stake length is, you will get more or less APY based on the difference in stake length.
Currently, only 9.416% of the total Hex supply is staked, so the Payout on average should theoretically be higher than 36.9%. I hope you are now starting to see how the system works and understand that Hex is quite like Bitcoin but pays rewards to stakers vs miners and inflates in a static percentage instead of decreasing over time like Bitcoin does. Of course, this is all very general.
So, is Hex a scam because it pays out +37% APY? Nope, you just need to understand the code and what is going on under the hood. Hex has many similarities to Bitcoin and was designed to have improved mechanics above and beyond what Bitcoin is.
- CRYPTOGRFX
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