Computers are made of transistors wired into NAND gates to create logic. Everything they do is in binary, so to properly and easily represent what a computer is storing, you need to use binary. To create a circuit that had 16 states instead of just ones and zeros would be pointlessly complex, because a 16 digit binary circuit can be created so easily.
Binary is a very inefficient notation however – there are a lot of ones and zeros in even relatively small numbers. Converting binary to decimal is hard, and converting decimal back to binary is hard. Converting binary to hexidecimal is childsplay. Each hex digit represents 4 1s or 0s, and always the same ones, no matter where it appears in the number. Memorize 15 4 digit patterns and you can convert any hex number to binary and any binary number to hex.
TL;DR We use Hexidecimal to represent binary because it is must more efficient in terms of the number of characters needed to represent a number than binary, and we use it instead of decimal because with a very small amount of practice, conversion to binary from hex is very simple.
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