Navigating The Surfaces of A Poly-Faceted Token Economy

A deep dive into the three-way decentralized finance feedback loop between the Hex, Hedron and Icosa token protocols.

16 min readSep 6, 2022


NB: I am not being paid to endorse any of the products mentioned in this article. This is only an attempt to simplify what is otherwise one of the most ingenious and complex decentralized finance ecosystems I’ve come across.

Let’s talk about Hex, baby…

Hex is the original decentralized finance, yield bearing store of value token created by the (in)famous retired billionaire Richard Heart, who has somehow become the villain of crypto while preaching to save crypto investors from the tentacles of centralized finance, the antithesis of why Satoshi Nakamoto created Bitcoin; self custody. The term “not your keys, not your crypto” are at the root of what it is to be the custodian of your own assets. No middlemen, no centralized entities. Just you and the smart contract. Which is exactly what Hex is.

Holders of liquid Hex tokens are able to lock them up in a long term stake (bond) for a set amount of time, which yields a daily payout based on a calculated share, referred to as a T-share, which factors a multiple of the amount of Hex tokens staked over whatever period of time, paying out a heftier bonus as you increase the time locked for a maximum of 15 years, or 5555 days, commonly referred to in the Hexican community as cuatro cinco (four fives translated from Spanish). Each T-share yields its owner the daily payout of Hex to stakers, which has been on average somewhere between 6 and 7 hex tokens per day. As stated on the Hex dapp staking interface: bigger pays better, longer pays better. Hex stakers earn bonuses for the longer lock up periods, increasing their T-shares and in turn increasing their daily yields. The cost of a T-share denominated in Hex is always increasing in value, meaning that whatever amount of Hex buys you a T-share today will be less than what it will cost tomorrow because of the way the protocol functions. To be clear, this shouldn’t be confused with the actual dollar cost of a T-share which will fluctuate in price based on the Hex token price, since the T-share price is denominated in Hex. However, the number of Hex it requires to mint a T-share is imminently increasing.

The simplest explanation of Hex is the comparison Richard Heart makes that relates Hex to Bitcoin as a store of value, but rather than using GPU miners to mine new coins, it uses a proof of stake model that operates on the Ethereum network, utilizing the security of its Proof of Work (PoW) network. Stakers uphold the price and network of Hex by locking up their tokens in return for the protocol’s inflationary yield , which is about on par with the inflation of BTC on the Bitcoin network distributed to miners for upkeeping its network and security.

Hex is a replica of the Bitcoin protocol running on Ethereum. Instead of Proof of Work, it’s Proof of Stake. Stakers take the place of miners earning the inflation yield while upholding the price and protocol.

There are extremely interesting mechanics and game-theory around the Hex token. Hex is inflationary in nature, so liquid holders are naturally being diluted. Naturally it makes sense to stake and lock up your coins in order to earn yield up to a maximum of 5555 days, or 15 years. Now, this isn’t to suggest that anyone should be staking for 15 years but it is an option if that’s part of your investment journey time horizon. That’s quite a long time to have your liquidity locked up and until recently there wasn’t a way to access that liquidity. In any case, once the Hex is deposited into the smart contract, it is effectively burned and removed from the market in exchange for the yield bearing T-shares that are minted in the process. This engagement is a contract bound by code; a smart contract. Breaking that contract involves severe penalties, so it offers motivation to stay the course and fulfill the contractual obligations.

As of the time of writing this there are over 60 billion Hex locked into the smart contract with over 100,000 stakers. The Hex community is vibrant, protective and proud of both Richard Heart and the product he built. There are multiple apps that have been created by community members used to visualize the blockchain analytics around the Hex token ecosystem, when future stakes are maturing, calculators to determine yield and all other sorts of tools that offer plenty of insight on what is occurring within the Hex protocol. All of this goes to show the strength and commitment of the community and the lengths they’ll go to, making Hex easily one of the most transparently traded tokens on the market. It is only traded on the Uniswap decentralized exchange where all of the liquidity exists, in the sake of decentralization and self-custody where the tokens being traded never leave your wallet and trades are executed through a smart contract function.

Hedron, the decentralized finance derivative layer built on Hex

Since its inception, the Hex protocol has been a standalone store of value which pays yield to its stakers. Hex stakes are illiquid, that is to say that staked Hex is locked for the durations of the term set by the user and not accessible until the end of the term where the initial principal and accrued yield is eligible for withdrawal. One may access it sooner but that would involve breaking the terms of the contract which would incur severe penalties, not only on the yield but on the principal deposit value itself.

Until now, there hasn’t been a way to unlock the liquidity trapped within the Hex protocol. Enter Hedron, the DeFi protocol built upon Hex as a derivative option that allows users to earn liquidity as yield in the form of HDRN, the native Hedron token, as well as Hex, in addition to being able to tokenize Hex stakes as and NFT, making them not only tradeable on the open market but also providing an option to collateralize those stakes for immediate loans that present various arbitrage opportunities which both, stabilize its price and provides value in the form of a usable, liquid asset.

Hedron is a DeFi (decentralized finance) layer built on top of Hex which serves to unlock liquidity by effectively creating a derivatives marketplace.

As mentioned, Hedron is a DeFi (decentralized finance) layer built on top of Hex which serves to unlock liquidity by effectively creating a derivatives marketplace. The mechanics are complex, but as always, the devil is in the details.

Hedron allows users to mint an HSI, also known as a Hex Staking Instance through the Hedron dapp which earns both the normal Hex yield that would have been accrued through the Hex dapp, but also yields HDRN, the native Hedron token. HDRN was originally made to be minted by original legacy Hex stakeholders, so there is currently a lot of supply in the form of claimed (and unclaimed tokens attached to those existing Hex stakes), not to mention, those same legacy Hex stakers had the opportunity to lock in bonuses in the first 10 days of Hedron’s launch, so there are some whales that are accumulating significant amounts of HDRN.

HDRN is minted from both legacy Hex stakes that existed prior to Hedron’s launch and Hex Stake Instances that were minted through the dapp post launch through the Icosa or Hedron dapps. Users can mint up to the amount of HDRN that has accrued up to that day, at any time. Mint today and you can come back tomorrow to mint whatever yield has accrued the following day right until your Hex stakes mature.

In addition to the mintable Hedron tokens that are accrued on HSI stakes, there is also the option to collateralize an HSI in order to immediately borrow the full amount of eligible HDRN that would have otherwise been eligible to be minted over the lifetime of the HSI stake. This opens up the possibility for various arbitrage opportunities, one of which is borrowing against the value of a long term HSI if the value of Hedron is worth more than the yield being paid out in a Hex stake.

Until now there is a mixed verdict on Hedron’s value and place with the Hexican community, which is a vibrant and outspoken one. Some are clearly on board, seeing the value of this protocol and its ability to unlock liquidity that would have otherwise been trapped, often for significant periods of time as long as 15 years, with the average staking period being approximately 7 years. Others see Hedron as an encroachment on Hex’s value proposition and deem it to be taking away from Hex’s positioning in what it promises to deliver on the time you are committing to lock up your tokens. Ultimately everyone is entitled to agree or disagree with my point of view, but in my opinion there is extreme value in creating a liquid derivative market on top of a store of value like Hex. In fact, this is exactly what Bitcoiners have been doing with wrapped BTC and other forms of tokenized Bitcoin for use in DeFi. However, the major difference in this case is that Hex and Hedron are both keyless, decentralized protocols and are created using the values and ethics that Satoshi Nakamoto invented Bitcoin with. You own your keys, you mint your yield, it’s just you and the smart contract, no middle men and nothing in between.

So what’s the need for Hedron?

As mentioned, Hedron unlocks the liquidity trapped in the store of value that is Hex in a few ways. Here is a list of some of the liquidity releasing methods that the Hedron protocol offers to both the Hex protocol and its users:

New Hex stakes can be created through the Hedron dapp and minted as a Hex Staking Instance (HSI) which can be tokenized as an NFT, making it transferable and sellable on the open market. These HSI earn not only the yield that would have normally been accrued in a typical Hex stake, but it is also eligible to mint HDRN based on the amount of days served.

The other very important aspect of the Hedron protocol is that loans can be taken against a tokenized HSI in the form of Hedron tokens, as well as a buyback in the form of Icosa (more on Icosa later). The loan terms are fixed and relatively reasonable. However, if loan obligations aren’t met and fulfilled, ie. delinquent loans, the HSI goes into default which after 90 days automatically goes to auction, meaning that the lot of HEX tokens staked in that HSI, which are accruing yield in the form of Hex and HDRN tokens may end up selling for less than their fair value on the open market. This creates a bidding war for yield bearing assets, particularly Hex T-shares which as stated earlier are consistently increasing in value denominated in Hex and Hedron, which can then be used to collateralize or used for potential arbitrage opportunities.

Hedron HSI use case flow diagram taken from

In order to participate in the aforementioned auctions for defaulted HSI which can potentially be discounted yield bearing Hex stakes at 90 day old T-share rates, potential bidders require HDRN tokens in order to bid on said stakes on auction. This is where the “a-ha” moment starts to kick in (a-ha moments are always good, love em), being able to pick up a long term yield bearing asset at potentially below fair market value, not a bad play. This contributes to the use case for the Hedron native token, which in and of itself has some very interesting tokenomics built into it. Once those HDRN tokens are used for the auctions, they are burned forever, contributing to the deflationary nature of the Hedron protocol’s elastic token mechanics. In addition to the deflationary aspects of the tokenomics, there are preventative measures worked into the protocol to avoid a situation of having an illiquid market by offering incentives and bonuses in times of low liquidity, where users that mint an HSI would be incentivized to do so with an amplifier bonus, earning the HSI more Hedron HDRN tokens than under normal balanced market liquidity conditions. This is similar to the bonus amplifier that legacy Hex stakers had the option to lock in rates at during the Hedron launch period. This was how the initial Hedron liquidity was spawned.

Adding more clever complexity to the mix, those auctioned HSI (tokenized Hex stakes) that are won in auction can then be collateralized all over again, eventually sending it to auction again, where more HDRN would be used to purchase it, which would then get burned, and so on.

A very interesting set of token mechanics, indeed. However, it doesn’t end with Hex and Hedron as there is a third and final piece of this complex trifecta.

Icosa, the 3rd leg of the stool

Icosa is the inflationary token that is emitted from the Hedron ecosystem. It is somewhat difficult to pin down exactly how it can be described, however a YouTuber and Hexican who goes by the name Diamond Hands does a pretty good job of contextualizing it by saying that Icosa can be defined as a Liquid T-share. As described in the Hex portion of this article, a T-share is what is minted based on the number of Hex being staked and the length of time, which is what entitles a Hex staker to their yield. Since the price of Icosa tracks the T-share, it should theoretically be increasing over time.

Icosa can be defined as a Liquid T-share which can only be minted into existence through Hedron stakes.

The ICSA token has no cap on supply, but can only be minted into existence. Its price is designed to track the T-share rate, however, because it trades on the open market and has arbitrage opportunities baked in, it is subject to price fluctuations and inherent volatility, at least for the time being since it is said that there is a theoretical price floor and ceiling tracking the Icosa token price.

Icosa flow diagram taken from

5 ways to obtain Icosa

With the concept of an inflating supply, Icosa is only minted into existence but there are various ways in which one could obtain ICSA tokens:

  1. Buy it on the open market, through the Uniswap decentralized exchange, which will increase its price volatility based on supply and demand dynamics
  2. Stake HDRN for ICSA yield on the Icosa dapp interface of
  3. Mint a We Are All The Source Address (WAATSA) NFT which is an ICSA yield bearing NFT bond that is redeemable once and only once by burning the NFT in order to claim the yield it has accrued. (This was a 14 day window of opportunity for early adopters which is no longer available at the time of writing this article.)
  4. Use a tokenized HSI (Hex Staking Instance) to do a buyback denominated in ICSA, which immediately puts the HSI in default status, forcing it to auction in 90 days. This is where the arbitrage opportunities can be interesting if one can determine the fair market value of ICSA vs a T-share.
  5. Stake ICSA for ICSA and HDRN yield, which requires a lockup term that is automatically set based on the number of ICSA being staked.

All 3 tokens combined create a positive feedback loop while doing some key things, such as encouraging more Hex stakes, which reduces sell pressure by locking up Hex for longer periods of time rather than having them liquid. This in turn incentivizes Hex stakers to mint their Hex stakes as an HSI through Hedron in order to earn yield in both HEX (which isn’t available until the end of the stake terms) and HDRN which is available to be minted immediately on loan or perpetually during the length of the stake accounting for days served and as many times the user wants to, right up to the maturity of the HSI stake. With the Hedron token whether earned, purchased on the open market or borrowed against, it encourages HDRN staking in order to earn ICSA (Icosa). Icosa being the inflationary token can become somewhat of a floating “stable” coin within this token economy, where there could be a general price floor and ceiling that would be stabilized through the inherent arbitrage opportunities in the system.

All of these functions allow for the unlocking of what would have otherwise been locked and inefficient liquidity in the form of the HSI, a transferrable and collateralize-able Hex stake. By allowing an HSI to be used for ICSA buyback for arbitrage, it also contributes to the stabilization of its price, also putting buy pressure on HDRN for those HSI stakes that default and end up going to auction that can then be collateralized, arbitraged, etc. This creates potential for various opportunities and value for users. It also leaves way for other DeFi tools and mechanisms to be built and introduced upon and perhaps even within these protocols.

Closing the loop

In this current time where we’re seeing the tentacles of centralized and legacy finance work their way into the realms of crypto, to me it’s more important now than it’s ever been to have some form of liquid market built off of a long term store of value, similar to what WBTC did for Bitcoin DeFi. However the important difference to recognize is the keyless nature of the Hex Icosa Hedron protocols. This is purely done through one’s own efforts; minting of yield, tokenizing of assets, arbitrage. All through the function of a set of immutable smart contracts on a decentralized network. Currently that network is Ethereum, however this entire cryptospheric protocol will also be available on Pulse chain when it launches since it will copy the system state of Ethereum making it immediately usable and liquid. It may potentially also be available on the Ethereum Proof of Work chain that will fork from the Eth 2.0 upgrade merge to continue mining Ethereum the old fashioned way, using GPU mining rigs.

In fact, the system somewhat reminds me in certain ways of what Terra and the Luna Foundation Guard was doing in DeFi 2.0 with LUNA, UST and BTC, but in a much more functional way. There is a critical difference from that of which Terra Luna proposed with UST, and that is that UST was always supposed to maintain a 1:1 peg with the US dollar, which was only fractionally backstopped by BTC and LUNA, both volatile assets. Part of what broke the algorithm was trying to maintain the peg while a whitehat financial hack that included somewhere in the range of 100,000 BTC being dumped on the market while simultaneously shorting LUNA and BTC as the Luna Foundation Guard was “steadily deploying more Bitcoin” to ineffectively try to backstop the selloff and in turn, depegging of UST, essentially blowing past their backstops and breaking the algorithm, the peg and the protocol minting a nearly infinite supply of LUNA (now LUNC) tokens.

The appeal of a decentralized supply and borrow market is extremely enticing and interesting to me. Especially now that we see what is happening with cases such as Tornado Cash and USDC, where Circle, the custodian of USDC has essentially blacklisted any USDC held on addresses that interacted with the Tornado Cash privacy mixing protocol that allows a user to anonymize their transactions. As if that weren’t bad enough, ETH 2.0 will be supporting this form of censorship, while USDC will be null and void on other blockchain networks. This ultimately means that USDC could be the Trojan Horse of DeFi, essentially making people’s USDC worthless if they (Circle) deem it to be so. It ought to be stated that the current market capitalization of USDC is over $55,6 billion and sits comfortably at the 4th ranked position below USDT, Ethereum and Bitcoin. This is concerning enough to make for a lot of trouble in the crypto markets if the situation goes further awry.

In this Hex, Hedron, Icosa environment there is no peg or promise of one. All prices will fluctuate and are meant to do so. It will naturally rebalance based on the demand, arbitrage and everything that happens within the mechanics of its own feedback loop and natural market dynamics. If that’s what maintaining a decentralized set of protocols of monetary value takes, then I’m all for it. I’ll face the volatility head on and try to seek out the best possible arbitrage opportunities available. Just because it’s a bear market, doesn’t mean there aren’t amazing opportunities in DeFi.

Honourable Mentions and Sources

I’d like to take a moment to make some honourable mentions of people that have been contributing to educating the public around what is otherwise a very complex and potentially overwhelming token protocol. If you’ve found any value in this article I encourage you to follow these Twitter accounts:

Icosa and Hedron official links and websites:

Links to the Hedron and Icosa websites are as follow:

The official Telegram groups for Hedron and Icosa are excellent sources for information and quick, respectful responses from a very supportive community:

You can follow Alex McWhirter, the founder and lead developer of the Hedron and Icosa protocols at:

Finally, if you’d like to stay up to date on some of the topics I’m interested in, particularly with regards to novel opportunities and protocols within crypto, follow me on Twitter at:

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Web3, crypto & DeFi growth and operations scaling + go-to-market strategist with over 20 years of experience. I write about DeFi, Web3, ops and token economies.