I recently received this message:

“One of the guys got into this about 2years ago and said he turned $1000 into roughly $1mm currently. Not verified though buh I am researching it for some time. Thought you might want to check it out and share your thoughts as well”

Of course we did check it out!!!

We researched the REX Token project and decided to share findings here for your benefit.

So that we have the right backdrop, I need to explain some concepts first.

Many have always seen Bitcoin as a worthy replacement for the traditional banking system.

https://twitter.com/TheMoonCarl/status/1438130493917179907​

But it is not.

Bitcoin (as well as most other cryptocurrencies) is primarily a medium of exchange, store of value, and (maybe) unit of account.

However, traditional financial institutions do a lot more than facilitating payments and keeping savings.

They also:

  1. Issue credit
  2. Exchange currencies
  3. Manage investments, etc.

Over time, blockchain, the technology on which Bitcoin operates, has evolved enough to provide these other financial services.

They are offered through applications known as decentralized finance applications—or DeFi in short.

What is DeFi exactly?

A DeFi is an application that runs on a blockchain and provides a financial service to its users.

A DeFi does not have an individual, company, or organization to manage its operations. It does not even have admins.

It is a platform that is fully automated and independent of humans.

Each of its steps is coded to self-execute accordingly. This code or program is known as a smart contract and is accessible to anyone who wants to audit it.

Some of the financial services that have been made possible through DeFi include:

  1. Exchanges like Uniswap and Pancakeswap.
  2. Lending platforms like MakerDao and Compound Finance.
  3. Prediction markets like Augur.

The newest addition to the list of DeFi applications is certificates of deposit (CD) on the blockchain.

Most commercial banks, credit unions, and other financial institutions offer certificates of deposit as an investment product.

In basic terms, you walk into your bank and give them your money to use or hold within a predetermined time. During that time, you have no access to the money.

In return, they give you a fixed interest, usually higher than what you get from an ordinary savings account.

HEX and REX

However, the funds don’t go to a bank but a wallet managed by a smart contract.

REX is in many ways similar to HEX, founded by Richard Heart in December 2019. Today, HEX has a market capitalization of close to $70 billion.

About 10% of all existing HEX Tokens are locked in CD smart contracts.

The REX Token project was launched in May 2020 and went live in June 2021. That means the friend of the person who sent me the message was inaccurate.

There is no way they invested in REX two years ago because the project did not exist until a few months ago.

Nevertheless, REX Token like HEX is a legitimate project. While HEX runs on the Ethereum blockchain, REX Token is a Binance Chain application.

In both HEX and REX, you buy the tokens and then lock them in a smart contract (stake) for a period between 1 day to 15.2 years.

The longer your lock time and the more tokens you stake, the higher the interest rate you get. The interest can be as high as 40% per year.

Strengths of Blockchain CD concept

  1. The guaranteed interest rate regime is based on the emission (generation of new coins) in the long term. In contrast, CD in traditional finance depends on central bank policies.
  2. There is no risk of an individual or a group altering how it works as the entire system is decentralized and managed through smart contracts.
  3. The interest is generally higher than what you are likely to get from the traditional certificate of deposit.

Weaknesses of Blockchain CD concept

  1. The model is not tested enough, and it has just been about three years for HEX, the oldest of the two main projects.
  2. Risk of bugs in the smart contract, as well as the Blockchain protocol.
  3. High volatility in the crypto market.
  4. The model can become obsolete or be replaced by better protocols while funds are locked for up to 15 years.
  5. No actual value is generated in the real world by the locked funds as they are not used in any way. The earned interest comes entirely from emission or inflation (newly created coins) and penalties.

Conclusion

While the friend of the person who sent us the question is obviously inaccurate, REX is a project worth looking at. It offers more opportunities, besides market appreciation, to earn passively from crypto.

Nevertheless, like with any other investment opportunity, do your own due diligence and don’t invest more than what you can afford to lose.

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