Since October 8, XEN token minting has consumed almost $4.5 million in gas fees, briefly causing ETH issuance to become deflationary. The project lacks features commonly associated with newly launched cryptocurrencies, such as pre-mint, token sale, CEX listings, admin keys, or origin wallets. Instead, it is free to claim by everyone with an Ethereum-compatible wallet like MetaMask.
Obviously, crypto degens rushed to mint XEN since there’s an incentive to hop on the bandwagon early, claim tokens and sell immediately. As a result, gas fees jumped from 13 gwei as of October 7 to 37 gwei at the moment of writing, as the XEN minting contract ranked first in the top 50 gas guzzlers (the most gas-consuming accounts) on the Ethereum network.
For those who have been in crypto since CryptoKitties hype (peaked in December 2017), the whole situation looks painfully familiar. Except that this time, besides clogging the network, the viral crypto project also contributed to reducing ETH issuance, which left many users with mixed feelings about the dubious token and quickly became the subject of jokes on crypto Twitter.
So, what exactly is XEN token? A hype Ponzi scheme, a useless toy project, or the next big thing? Let’s take a look!
XEN was created by the “Fair Crypto Foundation” which aims to “empower the individual in navigating the evolving world of cryptocurrencies through understanding of the first principles of Crypto.” However, there’s no evidence that the foundation has any other members except Jack Levin himself, who is also the only author of XEN whitepaper.
The project plays around the genius of Levin, who is said to have played a key role in building an early Google infrastructure. According to the XEN website, he was the company’s #21 employee, but left in 2005 as he “no longer felt he had an impact.” Larry Page, one of Google’s co-founders, reportedly told Levin that he can take on more challenging projects and succeed since he “won’t get a lot of competition.”
Since having left Google, Levin has been a CEO and co-founder of ImageShack.com and yfrog.com and is currently the CEO of Nventify Inc, a cloud-based infrastructure provider. Before launching his own token, he had a short but passionate affair with HEX — a cryptocurrency known for its aggressive marketing that promised “life-changing wealth” to investors — which is currently 92% down from its September 2021 peak.
In fact, XEN and HEX share many common features: both are free to mint, pitch themselves as an alternative to Bitcoin, have no utility, and promise high APY staking with no revenue source to support the yield.
XEN has an uncapped supply and “no intrinsic value,” which is explicitly stated in the project’s whitepaper. As the document explains, XEN tokenomics will eventually become deflationary — as more and more people join and participate in minting, it will be harder to mint more XEN due to the “naturally sloping adoption curve.”
“Each participant makes it harder for new participants to receive rewards, unless new participants extend the amount of time to get their rewards. This is similar to Bitcoin mining difficulty,” the whitepaper reads.
The number of tokens each user can claim is based on a complex formula that takes into account how long the user is willing to wait for the airdrop and how many people have already interacted with the minting contract. The more time passes, it becomes increasingly difficult to receive XEN, which is expected to inflate the token price.
What’s even more suspicious is the fact that the XEN team (if there’s any besides Levin) makes no effort to prevent Sybil attacks — it straight up encourages it. “Every user can create as many wallets as he want,” the website FAQ reads.
So, summing up, XEN price comes from the expectation that more users jump on the hype train, as early adopters make the most profits. At the moment of writing, XEN trades for a fraction of a cent, down 99% from its $1.04 peak. The moral of the story is that if something looks like Ponzi, trades like Ponzi, and works like Ponzi, then it’s most likely… well, you name it.