What if Bitcoin was an ERC20 token on the Ethereum blockchain, didn’t require its own hardware to secure the network, and had its entire supply redistributed? This must be the premises on which the veteran bitcoiner and successful YouTuber Richard Heart based his quest on to build Bitcoin Hex.
However, the project seems to me more of an attempt to print new money to attract the followers of thought leadership into a sketchy scheme which isn’t necessarily fair, transparent, or even viable as a way to attain the goals of BTC.
The idea of inventing a better version of Bitcoin, which solves some issues or adds extra features, has been around for a long time and precedes the popularization of the term “altcoin”. However, the attempt has always been faced with technical shortcomings, a questionable degree of decentralization, and poor user adoption.
People trust Satoshi’s blockchain because the code is transparent and has been reviewed by countless computer science and cryptography experts. The changes made to the Bitcoin Core software client are made conservatively and only after thorough debates which prioritize decentralization as the absolute quality. The 10-year long uninterrupted running time is a testament of reliability.
Conversely, Bitcoin Hex is advertised as the project which takes away Satoshi’s coins and redistributes them to the holders. But beyond this romantic ideal, which seems to come straight out of Robin Hood, hides a scheme whose game theory isn’t necessarily fair. It will not be the next Bitcoin, it will not get adopted by the whales it tries to penalize during the airdrop (or during the distribution via smart contract). And it certainly doesn’t deserve the name Bitcoin since it holds no merits in contributing to the network’s Proof of Work.
First of all, what happened to Richard Heart?
If you watch the August 2017 debate between Richard Heart and Roger Ver, you will notice that the flamboyant show host used to be a hardcore bitcoiner who defends the store of value qualities and tries to find ideological middle ground with the Bitcoin Cash proponent. When Ver mentions that Bitcoin had lost most its market dominance due to its inability to scale via bigger blocks and meet the demand for space, Schueler (stage-named Richard Heart) smartly replies that the new world computer project (aka Ethereum) has brought lots of new money into the space. Ethereum investors aren’t necessarily libertarians who understand the value of sound money and long for the days of the Gold Standard. Rather they can be said to be geeks who invest in the promise of world-computer on blockchain and left-wing idealists who think they can decentralize everything with a blockchain.
The business-minded Roger Ver reminds everybody that Vitalik Buterin’s initial plan was to build Ethereum on top of Bitcoin – and it if wasn’t for the selfish Core devs, all the money which was poured into Ethereum would have benefited the Bitcoin project instead. This is where the most important part comes in: Richard Heart points out many Ethereum protocol flaws, ranging from poor coding to bad decisions in terms of programming language implementations. Too much coding diversification leads to a big mess which doesn’t fulfill its goal as effectively and may never achieve its world computer ambitions.
Here’s a quote from Richard Heart himself, as he defends Bitcoin during the debate with Roger Ver (video with exact timestamp is attached too):
“The Ethereum network is down often because they use a blockchain that fills up just like ours. And it fills up faster because they have larger blocks. So there is literally a competition to shove your transaction into the new ICO as a miner before you let actual normal retail people in, so that you can get the coins before they run out. So there’s already front-running going on in Ethereum mining, there is already full blocks going on in Ethereum minig, there’s already millions upon millions of dollars being lost to attack surfaces being lost to gigantic attack surface in Ethereum.
And I’m glad that the poison and the problems and the design decisions that Vitalik and his crew made, which are unrepairable I might add: multiple consensus implementations from different software languages from different teams are very much more likely to fall out of consensus than a single software implementation. It’s very hard to write one thing that doesn’t have bugs, it’s exponentially harder to write two or more things that don’t have bugs.”
A year and a half later, the same Richard Heart is trying to promote what he proposes as a better version of Bitcoin which is built on top of the same Ethereum which he deemed “unrepairable”, “down so often”, biased towards ICOs, more likely to fail than Bitcoin, and the reason why millions of people lose money.
This change of heart (terrible pun intended) comes in a moment when the market is down and the interest for new cryptocurrency projects (be that ICO tokens or new coins on proprietary blockchains) is the lowest it has been since 2017. Assuming that no whale will sign up for Bitcoin Hex and Richard Heart is the wealthiest of bitcoiners to join the project, he will then also become the biggest participant who has the godly power to manipulate the price as soon as the coin gets listed on exchanges. The market sentiment can be adjusted by the self-entitled “thought leader” every week on the show, as the viewers will most likely get encouraged to HODL their Hex through mysterious dumps. It almost sounds too good to be true.
Bitcoin Hex resembles a Ponzi scheme much more than many other cryptocurrency projects, and is definitely the most centralized of all coins to bear the name “Bitcoin” (at least the other ones are actual Proof-of-Work forks where anyone can run a node which can be mined fairly). But before jumping to conclusions, let’s have a look at the team behind this initiative.
All Richard Heart’s men: the people behind Bitcoin Hex.
A thought leader like Richard Heart, who benefits from the attention of tens of thousands of viewers for each YouTube livestream he makes, should theoretically have no problems attracting brilliant minds who can nurture the idea of a Proof-of-Stake Bitcoin that’s built on the Ethereum blockchain. Sure, the Bitcoin Core developers are busy with their work and probably feel to jealous about this brilliant concept anyway. The folks working on the development of Ethereum clients must also find fascination in tokenizing Bitcoin on their blockchain on a 1 to 1 ratio. However, they must be busy working on Casper, Raiden, or some type of blockchain sharding solution.
So who is left in this space to help develop Bitcoin Hex? Well, it’s all in the hands of three software developers and a marketing executive. The first red flag about the situation – aside from the absence of academic peer-reviewers, advisors, and big names who endorse the project – is the lack of social media links. Only the lead developer, Kieran Mesquita, is given the privilege to have his personal website, Medium blog, and Twitter page featured. Everybody else requires extra research.
The following section will scrutinize the experience of each team member. Before diving into the analysis, it’s important to mention that none of this is an ad-hominem insult, every person mentioned has the right to comment on the statements (and their words will definitely get added to this article).It’s not malevolence or the willing to do personal harm that fuels these statements. The ultimate criterion and assumption for the process is given by the fact that Richard Heart is a “thought leader” who knows all of the greatest people in the field and can afford to hire the most qualified team to work on his project. Or who knows, maybe that he does it all by himself and wants some lesser-known people to stick around thanks to his outstanding generosity to elevate others.
Upon contacting Kieran, he revealed that he set up a bounty on Bitcoin Talk back in 2012: he wanted to have a more efficient Litecoin miner for the specific CPU that he owned, and received support from Gweedo (a more popular user). While the contribution isn’t quite indicative of “writing early code” (as the description suggests), this does prove that he has been involved in the Bitcoin space for over six years. There is also a chance that the description wasn’t written by him, and the information was stretched to portray and idealized situation – as is often the case with highly ambitious projects which promise quick enrichment.
In order to verify more about Kieran’s background and his relation to the Litecoin community, I’ve contacted project founder Charlie Lee and long-time developer Loshan. Their responses are posted below.
Next up is Cody Lamson, who might just be the most transparent member of the team. In his case, what you see is what you get. He has a portfolio website to back up every project he’s worked on. He’s the one with the most proven experience in smart contracts, ERC20 tokens, and Ethereum projects development. He may not have the greatest credentials in the Ethereum space, but everything about his work is crystal clear and appears to be legitimate, as he’s worked on interesting (albeit gimmicky) projects like Crypto Weddings and Noob Coin. Interestingly, none of his GitHub work has been done in the dedicated Bitcoin Hex repository.
The other developer in the Bitcoin Hex team is Dan Emmons, who is listed as a contributor. On his LinkedIn profile, Emmons looks like Jameson Lopp, but likes to use big words in a rather loose way (much like the thought leader behind Hex): he calls himself a Bitcoin maximalist, but he’s also a certified Ethereum developer who likes fintech and the trading side of affairs. This sum of buzzwords rounds up the image of what seems to be a Jack of all trades whose interests seem to be a match made in heaven, and who is compatible with the polygamous nature of Bitcoin Hex. His experience in programming and software development can definitely come in handy, but it’s unclear what it is exactly that he does for Richard Heart’s project. Since joining GitHub in 2017, he has made zero contributions to anything Hex-related.
Last but not least, we have market executive Brent Morrissey. According to his description, he’s a “cryptocurrency investor and business management professional”. Yet a simple search engine search reveals more results about his activities as the lead singer of a British rock band. You won’t find anything crypto-related, and his clothing company Vegeshirt with relatively minimal amounts of social media followers. The data is pretty underwhelming, to say the least. Mr. Morrissey’s “extensive experience in digital marketing, search engine optimization, and social media marketing” isn’t backed by numbers, but there’s still a chance that he’s done work behind the curtains.
However, when the influential thought leader behind Bitcoin Hex gets tens of thousands of views on each video, it’s unlikely that the project needs any specialized marketing work. At best, it’s about doing social media management, responding to e-mails, and handling referral links so the big boss can focus on the grand vision instead of handling these smaller tasks.
None of these men is among the most reputed and best known developers of either Bitcoin or Ethereum. And in some cases, the information presented is misleading, incomplete, or even fictional – all of which are the usual red flags for a scam. If any of the data presented is flawed, incomplete, or unfair in relation to the real state of affairs, then the article will receive amendments with special notes and public apologies with full acknowledgments.
Nevertheless, the ambitions behind Hex are pretty high and far exceed the amount of work five man can complete in a truly flawless and trustworthy. Speaking of trust, the entire BHex protocol relies on trust in a smart contract that’s stored on the Ethereum blockchain. And it would be a good idea to talk about some technicalities too.
Why Bitcoin Hex is technically worse than any other coin project bearing the Bitcoin name.
If you ask Bitcoin Core developers Greg Maxwell, Andrew Poelstra, or Luke Dash Jr. about what makes Bitcoin special, then they will definitely point out to the censorship resistance, the time-tested immutability, the autonomy-oriented philosophy, the system of incentives, and the network effect. In reality, an ERC20 token like Bitcoin Hex has none of these qualities. Instead, it steps into the scene with a promise of redistributing the lost coins and unclaimed coins to the holders, as well as the airdrop ethos.
By not directly selling you the coins, Hex escapes the mandate of the SEC and probably won’t get classified as a security (at least not until it hits exchanges and the real trading begins). By not using any dedicated minting equipment which consume valuable resources, Hex is way too convenient. But if even BTC is criticized for not having an intrinsic value, then Richard Heart’s project is nothing but fool’s gold which emerges out of thin air and promises to make everybody richer at the expense of a simple sign-up process.
People watching the weekly interviews and understanding the process will probably think that they have nothing to lose. But the price to pay is privacy itself, as participants to the Hex scheme willingly reveal to the public how many bitcoins they own (unless they obfuscate their transaction history with a tool like Wasabi wallet, that is). This can be a pretty smart experiment to measure greed and desperation in the middle of a prolonged bear market, as the reward for this questionable voluntary act is a worthless token that may go up in price if anybody gets fooled to spend real BTC to acquire it.
But now let’s talk about the technical flaws of any ERC20 token. First of all, it relies on the security of the Ethereum blockchain – which, as Richard Heart himself acknowledged back in 2017, is flawed and requires a lot of work before actually reaching its true potential. Secondly, there are plenty of known issues and loopholes in Ethereum smart contracts developed in languages like Solidity, and not even Vitalik & co. were able to prevent the DAO hack. It’s also one of the reasons why companies like Blockstream are actively working on developing simplified and more secure smart contract programming languages – with Simplicity being a prime example.
If you really want to build a fairer Bitcoin, then you must take into consideration every little design flaw and be prepared to fix it on time. As Satoshi Nakamoto famously said: “When designing Bitcoin, even aliens need to be accounted for”. While this is a witty and cryptic remark, it definitely implies that everything that can possibly go wrong with the protocol has to be taken into consideration, so that quick fixes are ready to be deployed without affecting the nature of the network itself.
Hex doesn’t take into account the unpredictability of the Ethereum network, the fact that changes in the roadmap are made within days of deliberation by a few thought leaders (*cough cough* Constantinople), and the lack of control that it possesses as part of a greater scheme. There is no real autonomy for the Hex project, its resistance to attacks or censorship is limited to the security granted by Ethereum, and the smart contracts have been proven to have design flaws even when they’re developed by the brightest minds in the industry (and once again, the DAO hack must be mentioned).
Another criticism has to do with the single point of failure and was presented to Heart himself during the live interview we shot on December 29th, 2018. However, due to a terrible error, the first hour of the debate was not recorded, and the beginning of the video features Mr. Heart summarizing some of the ideas which have been discussed prior to realizing the streaming issue. The problem with the summary is that the flow of the debate, the expressiveness through which the arguments have been presented, and the greater context are absent.
Nevertheless, I did tell him that since there is a clear precedent of the Ethereum blockchain being rolled back through a hard fork, one can easily imagine how a malevolent nation-state actor can kidnap Vitalik Buterin and make him bring arbitrary modifications to the network. The idea might be far-fetched and unlikely, but it’s still a scenario that wouldn’t affect the real Bitcoin or any of its forks which are decentralized enough to be immune to the decisions of their founders.
Any hard fork which rolls back the blockchain can spell doom for a project like Bitcoin Hex. But then again, no part of the planning seems to concern the longer term. The existing red flags point out to a Ponzi scheme: people get their free worthless tokens, they get encouraged every week during the show to use their BTC to buy more, the distribution becomes concentrated in the hands of a few, and as soon as exchanges somehow accept to list Hex, the pump and dump game can begin.
There is no Bitcoin-ness in Hex.
The entire premise of Bitcoin Hex is to help BTC holders get richer in the middle of the bear market, so perhaps this entire analysis is pointless. There is nothing “Bitcoin” about Richard Heart’s project, and it’s unlikely that the project will survive past the point where the founders make extra money by dumping their bags on the greedy latecomers.
If Mr. Heart is so benevolent and wants to help his viewers make money, maybe that he himself shouldn’t participate, as it’s very likely that he owns the most bitcoins of everybody following the development of Hex. No whale would ever compromise their privacy by becoming associated with this kind of scheme, so the entire “10% whale tax” gimmick is just a psychological trick to reassure people who own small amounts of BTC that this project was made for them.
But it won’t be long that the Hex holders will be encouraged to exchange their bitcoins for Hex, under the promise of maximizing their wealth. And it’s only then that the tragedy of free money truly occurs. BHex (because it doesn’t deserve the Bitcoin name) is nothing but a diversion and a Trojan horse for greedy people.
The airdrop is scheduled to take place about six weeks after this article is published, and all owners of BTC are promised to become millionaires in Hex for just filling in a sign-up form. So if you’re greedy enough to take a shot at this project, then you’re absolutely free to do so. But just remember this: by joining the Hex project, you have nothing to lose but your privacy. And maybe somebody will find great uses for the data generated in exchange for some worthless Hex tokens.
Trading gold for stones.
The Bitcoin Hex tokens are given for free to BTC holders who sign up – but until somebody actually trades another cryptocurrency for BHex on exchanges, the tokens are worth zero. This is an important clarification to make, since Hex is not a real Bitcoin fork, has no mining costs, and its development and maintenance require significantly lower efforts as compared to a Proof of Work coin.
Therefore, the issued tokens are the equivalent of stones: common, available in high amounts, easy to get, and undesirable to people outside the cult which is led by the stone-loving thought leader. There is an important distinction between BHex and rocks too: the latter can be fun when you throw them to skip across water.
Bhex can only be valued on the market if people trade their precious BTC in exchange for millions of worthless tokens. To some, this can seem like a smart investment that can potentially double the investment and subsequently acquire more BTC. However, what we have at stake is a zero-sum game where the supply of Hex would get traded back and fourth at key moments.
When are these key moments? Well, let’s just say that the right time to sell your free tokens is when someone becomes willing to buy. And the market sentiment can be influenced by the charismatic thought leader who will remind those who missed on the airdrop that they can still get tokens for a relatively small price.
It’s not like the wise early adopters of Bhex will get to dump their bags on the fools who willingly trade gold for stones. The only knowledgeable person in this project is Richard Heart himself, and he can switch the narrative according to his buy and sell orders. People will be watching his show waiting for trading signals, but discover that they get outplayed by a mastermind who has it all figured out to maximize profits. The big dump doesn’t even have to happen all of a sudden or in the first year: but soon enough the folks who greedily bought Bhex will end up holding a dead token that nobody is willing to trade.
Just keep in mind that Hex has no utility, doesn’t serve any other purpose other than boosting the founder’s ego and financial capital, and will eventually leave a lot of people with less BTC. Even if the stones were bread, you wouldn’t be able to make money out of them if you didn’t convince somebody to give you salmon for your loaf. Price is always relative in relation to another good or commodity, so owning a million Hex means nothing unless somebody else trades a more valuable cryptocurrency for a promise of quick enrichment.
If BitcoinHex was an ICO, then the SEC would prosecute it in no time. But given the “free” nature of the offering and the unregulated state of affairs in the cryptocurrency space, people can still get away with creating such schemes. This isn’t a call for stricter regulations, but a call for reason – when it’s all over, only the founders who get to find out first about exchange listings and incoming money will get rich. Everybody else is a loser, in either financial or time-management terms.
Update: Upon receiving a message from lead developer Kieran Mesquita, I’ve adjusted the information about his previous work to include the bounty he submitted on the Bitcoin Talk forum back in 2012. While this isn’t quite “writing early code”, it reveals interest and involvement in the space.
Update 2: The “Trading Gold for Stones” subchapter was added to further clarify about the value proposition of Hex.