HEX is the first Blockchain Certificate of Deposit (CD) in the cryptocurrency ecosystem, the banking equivalent of a term deposit. By investing in HEX, instead of going to a bank and putting dollars or euros on deposit account, you stake your funds in the form of HEX tokens using a smart contract. The investment must last between 1 day and 5555 days (15.2 years). At the end of the selected time, you recover your funds with your profits. You can buy tokens by exchanging other cryptocurrencies for HEX. Then, through the go.hex.com/stake website, you stake a certain amount of tokens for the selected period.
Staking tokens is completely voluntary and optional. Alternatively, you can simply buy and hold HEX in your wallet without interacting further with the HEX contract. Assuming the price of the token rises in the long term, you will one day be able to sell it at a higher price. However, no interest will be accrued while you wait.
There are two key differences that should be mentioned here between a traditional term deposit in a bank and a HEX contract. In a bank, you save let us say, $1,000 for a period of seven years. You receive an average of 1% interest per annum for this, meaning that after 7 years there is a total amount of $1072 in your account. Unless the bank goes bankrupt or some other drastic and unpredictable story happens, you are guaranteed to get your $1072 back.
Using the HEX contract, you buy HEX tokens for a value of $1,000. Let’s say you get 20,000 HEX for that because on the day of purchase the price of one HEX was $0.05. The HEX contract pays an average of 38% interest per year. So after seven years you will have 190,626 HEX. If HEX is still worth $0.05, you will have $9531. If HEX falls in value to $0.01, you will have $1906, and if HEX rises in value to $0.25, you will have $47,656. And so on… HEX guarantees you a payment of your capital and interest in HEX.
So it works in the same manner as a dollar-denominated term deposit in a bank, except that the interest is much higher. However, HEX does not guarantee what its dollar value will be on the day the deposit ends. With these two elements, it fundamentally differs from a conventional term deposit with a bank.