HYCON — A Parody of Decentralized Money

15.05.2019

TL;DR. Ecology:2. Technology:3. Decentralization:2. Valuation:2. Rating:2/10 

Introduction

HYCON, short for Hyperconnected Coin, is a DAG (Directed Acyclic Graph) based cryptocurrency first seen on bitcointalk.org on 23rd of February, 2018. By aiming to implement the DAG SPECTRE consensus protocol one day, the project's initial goal was to have short times between blocks and thus fast transaction confirmations. But HYCON did not start out with SPECTRE  -  it launched with the privacy-focused and more widely used Cryptonight consensus protocol, built by the anonymous CryptoNote developers some years earlier. The team had long term plans to switch to something it dubbed Proof of Space, mainly due to sustainability reasons, but it is not exactly clear what is included in that concept.

HYCON's first blog post was published a month before the BCT thread showed up, detailing the January 4th 2018 launch of the HYCON genesis block on what they dubbed the Infinity blockchain. This launch was just that - at most the publishing of a genesis block. It did not mean that mainnet went live that date.

The genesis block event was preceded by a September 2017 Korean pre-ICO event held by the Korean blockchain technology company and HYCON steward Glosfer, which raised around USD 14M. Curiously, a second ICO was announced in January, after the genesis block apparently had been created. This ICO was to occur on the 30th of March, 2018, and had a hard cap of USD 60M. A maximum contribution of USD 50 000 per individual was set as well, an a KYC process was put in place to enforce this rule. The ICO ended on 11th of May, 2018, and was followed by the mainnet launch on the 1st of June.

On 14th of September the same year, a large HYCON hackaton was held in Seoul. During that same month, the coin was supported by Ledger as well, meaning users could securely transact by using the company's well-known hardware wallets. In October, a Hycon-based alliance was announced by the team. In that same post, the team also indicated a future adjustment of the total issuance volume.

In the end of 2018, it became apparent that HYCON was going to implement GHOST, a mining protocol intent to reward also orphaned blocks in order to bolster the blockchain's total hashrate security. This implementation was described as a milestone on the journey from Cryptonight to SPECTRE (something that occurred as early as November 2018, meaning Hycon became a DAG based cryptocurrency).

In an early FAQ, the team stated that a total of 10B tokens would be issued. 7B of these were to be mined over a period of approximately 50 years. But in November, 2018, details on the earlier mentioned supply changes were finally released. Total supply of HYCON was cut in half, to 5B tokens in total. Daily block rewards were set to decrease by as much as 90%, and a HYCON Foundation buyback plan was announced as well. Most of this occurred or will occur now in 2019.

Ecology

The HYCON team has conducted or will conduct a number of scammy cryptocurrency marketing practices, like a referral program, airdrops, social media bounties, token burns, and last but not least  -  this mainnet launch party and this GHOST protocol YouTube trailer. It has all the hallmarks of a really bad value protocol, treated as a joke rather than something that is truly serious about being hard money and thus able to attract stored value. The November 2018 buyback plan is yet another marketing-focused move from the HYCON team, as they try to cater to short term greed of disloyal token holders rather than having any type of long term vision of how the protocol ought to actually create real value. When looking at the team's 2019 plan, it is evident that it is extremely price/pump focused as well, with 4 out of 5 items concerning air drops, buy backs or new tokens.

An official HYCON blog is actively pushing out updates to stakeholders. Meanwhile, the HYCON subreddit is completely dead, with the last thread being a month old. This probably indicates that most of the community are, or were, Korean. The HYCON team regularly organize as well as attend different blockchain events around the world. With this said, it is still clear that no one is using the coin. BD Ratings found no evidence of any real usage on any HYCON block explorer.

Grade: 2

Reasons: Very inactive or invisible community. Scammy marketing and tokenomics.

Technology

The HYCON Core GitHub repository has not been updated for many months, but some progress, mainly by one developer, can be seen on the new Rust implementation. Before the mainnet launch, a code audit was completed by Entersoft Australia.

By implementing a version of Cryptonight, the HYCON blockchain made use of battle tested technology. It is therefore probably a bad move in terms of blockchain security to switch that mining algorithm to what the team dubbed Proof of Space. Of course, if the new algorithm was deemed safer and more technically feasible in the long run, there is an argument to be made for such a switch, but the only argument the team initially brought up was that of sustainability. Sustainability alone is absolutely not enough to justify this experimentation.

Going back to the HYCON team, its quality is still uncertain - we simply don't know how good cryptographers are in it. Both Cryptonight, GHOST and SPECTRE were adopted externally, meaning HYCON is a blockchain consisting of properties essentially thought up by others. It is nothing wrong with that, but it anyway makes it hard to know the capabilities of the HYCON developers. What we do know however, is that the team changed programming language of their core client (from MS Typescript to Rust) just months after mainnet launch. The choice to implement GHOST as a consensus mechanism, followed by the implementation of SPECTRE indicates further that the team is fine with constantly changing important technical aspects of the blockchain - something that may turn out to be dangerous. It should also be added that the SPECTRE implementation was allegedly the first in the space, which points to some competence.

Grade: 3

Reasons: The team still develops the core client. Multiple successful implementations of consensus mechanism changes.

Decentralization

By establishing Glosfer as a for-profit company in the middle of the whole platform, it ultimately leads to centralization around this company. In addition to this basic danger of centralization, the company has vowed not to release any financial information about itself as well.

HYCON's initial issuance schedule resulted in a 30% pre-mine to the team, partners and ICO investors. As the HYCON team only got a fraction of the pre-mined stash, the result is a not too bad pre-allocation of tokens that could potentially have centralized the project. All this changed however in November 2018 when the HYCON team decided to go berserk on the delicate tokenomics of the then running HYCON blockchain (while at the same time praising decentralization). The combined effect of a total supply halvening, as well as the massive reduction of mining subsidies was was an obvious attempt to pump the price of the HYCON token. It of course revealed that HYCON is extremely centralized, when one entity on a whim can change the monetary policy so drastically.

Grade: 2

Reasons: HYCON developers evidently play around with economic policy.

Valuation

HYCON is valued to around USD 20M, and the valuation of its circulating tokens places the project at #262 on coinmarketcap.com. The insanity of changing almost all aspects of token supply and token issuance schedule revealed how centralized HYCON is. It can be considered to be unsound money, and will likely trend towards zero in the coming years.

Grade: 2

Reasons: Centralized.