SafeMoon is one of the newest and fastest growing altcoins, even in the crazy cryptocurrency market that’s seen a good number of tokens increase in value by thousands or even tens of thousands of percent in 2021. Launched on March 8, 2021 it is a BEP20 token that exists on the Binance Smart Chain. It’s also quite unusual in a world of cryptocurrencies that are trying to reduce transaction fees to promote trading because it actually taxes sellers, thus penalizing users for trading the token.
In some respects, it seems like SafeMoon is following the same approach to cryptocurrencies that value investors like Warren Buffet and Charlie Munger take to stocks. That is to follow a buy and hold philosophy, where those who hold the longest receive the greatest rewards.
What is Safemoon?
SafeMoon is an altcoin created on the Binance Smart Chain. It was launched on March 8, 2021 in a fair launch where the devs burned all their tokens, and participated in the coin offering just like everyone else. In the short time that SafeMoon has been in existence it has added nearly 2.5 million users to its protocol, while burning over 40% of the total token supply. SafeMoon was created to address the issue of impermanent loss, and as an additional feature it promotes buying and holding its token rather than speculating to drive up the price. It does this through a “tax” on any transaction where SAFEMOON tokens are sold.
One criticism of Bitcoin and similar cryptocurrencies is that they’ve strayed from their purpose. Initially created as an alternative to the centralized fiat currencies controlled by central bankers, Bitcoin and many other cryptocurrencies have become little more than commodities, with traders, investors, and speculators simply using them as investments and tradable assets.
What Problem Does SafeMoon Address?
With the explosion of DeFi has come the problem of impermanent loss, and because so few investors understand the mechanisms that create impermanent loss there are many who have been sucked into the high APY yield-farming trap. It’s not surprising. Seeing an APY of 100% or greater brings out the greed in most of us. Unfortunately, what inevitably happens is the greedy trader gets pushed out by early investors who collect their profits and create the bursting of the valuation bubble. SafeMoon uses three simple functions in each trade to combat impermanent loss and create a better protocol. These are Static Rewards (Reflection), Manual Token Burns, and Automatic Liquidity Pools.
1. Static Rewards
The SafeMoon developers feel that using static rewards can solve a number of problems associated with yield-farming. For one thing, because the reward amount is conditional on the trade volume of the token there is a reduction in selling pressure of the token caused by early adopters selling tokens after farming the insanely high APYs.
2. Manual Burns
Burns have been used by a number of protocols, and sometimes they can make a difference, but not always. Continuous automated burns tend to have a positive impact in the early days of the project, however the impact slowly loses its momentum since the burn can’t be controlled to maximize its impact. By contrast a burn that’s controlled by the team and based on project achievements can help keep community engagement high, and the impact on the token just as high. Cypto communities appreciate the transparency that comes with advertised burns that can be tracked.
3. Automatic Liquidity Pool (LP)
The SafeMoon team calls the Automatic Liquidity Pools the “secret sauce” of SAFEMOON. They point out that Automatic LP provides two benefits to SAFEMOON holders. The first is that the smart contract attracts tokens from buyers and sellers and adds them to the LP, thus creating a floor for price. Secondly, the 10% tax on SAFEMOON sales acts as an arbitrage resistant mechanism that maintains SAFEMOON as a reward for holders, not as a speculative tool.
Is SafeMoon Safe?
SafeMoon has been compared with BitConnect, a well known crypto Ponzi scheme that was shut down in 2018 after two U.S. state securities regulators warned investors of the similarity to a Ponzi scheme. There have been other criticisms of SafeMoon based on the founders locking away over 50% of its own liquidity pool. There are claims that this could lead to a “rug pull” by the developers. This is a type of exit scam where liquidity is intentionally drained from the market, leaving those holding the token unable to sell. SafeMoon’s CEO John Karony claims that the liquidity is being held to keep the token more secure.
The SafeMoon Team
The SafeMoon team remains small as the project is new, but they are looking to expand that team as they move into the DEX and NFT spaces in the future. The current CEO of SafeMoon is John Karony, an ex-analyst for the U.S. Department of Defense. He is also the founder of TANO a newly created game streaming platform. He has no background in blockchain or finance.
The CTO if SafeMoon is Thomas Smith, who is also a co-founder of TANO with Karony. Smith is a long-time entrepreneur and technology supporter. He is a self-taught programmer and has held a number of positions as Director of Software Engineering or CTO for a variety of companies.
Safemoon Token History
As you can see from the chart below SAFEMOON has had a volatile history, even though it’s only been trading for a short time. From a low of less than $0.00000001 in March it shot up to an all-time high of $0.00001339 on April 20, 2021. It rapidly fell to $0.000003767 over the next three days.
It bounced and then dropped back near that $0.000003767 level again, bounced and traded in a range of roughly $0.0000075 to $0.00001 for several weeks and then declined again, finding support once again near the $0.0000035 level. Since then, it has climbed back to the $0.0000047 level.
Conclusion
SafeMoon has undoubtedly made some people quite rich in its first months of existence. That’s very attractive, but it is also how all Ponzi schemes get started and build momentum. People learn of early adopters making 500% or 5,000% returns and they get excited and pour their money into the scheme. Maybe it even keeps going for years, but eventually all Ponzi schemes eventually go bust.
As it stands SafeMoon has no utility other than to make money. And that only works if people remain excited and the price of the token continues rising. Only you can decide if that’s a risk you can afford to take. Because you could end up holding a bag of worthless shitcoins.
