From time to time, the crypto industry sees projects that appear on the scene with a big bang and claims by the project’s developers that the project can change the world. In some cases, the projects do go on to make an impact, but in other cases, they peter out and die.
SafeMoon is one such project which claims to
hold a lot of potential. According to the official SafeMoon website, SafeMoon is “A human-focused technology and innovation business expanding blockchain technologies for a brighter tomorrow. [SafeMoon is] deeply connected to and driven by our award-winning community (The SafeMoon Army), we are innovating for good. Building blockchain, commerce, metaverse and NFT products to derive new kinds of value from crypto technology and to apply it to increasingly better use.”
SafeMoon’s idea is to use static rewards (matching the reward to the volume of the tokens being traded) to remove the pressures that mount on a token when large amounts are sold.
In this article, we dive into the SafeMoon project to break down how it works (supply, network fees, token distribution, governance, etc.) to determine if it is the gamechanger it claims to be.
SafeMoon Tokenomics.
SafeMoon V1 was the first iteration of the project. In V1, SafeMoon launched with a total of 1 quadrillion tokens. Yes. You read that correctly. 1,000,000,000,000,000 tokens were launched at the inception of the project. However, the SafeMoon team decided to burn 22.3% of that supply, leaving just 777 trillion tokens available for grabs in the early days. The SafeMoon development team says it chose a very high number of tokens because it wanted to democratize access to the tokens and put a token in the hands of as many people as possible.
All of that changed with the launch of SafeMoon V2. The new changes launched in V2 are as follows:
· 1:1000 Token Consolidation (which reduced the 585 trillion circulating tokens to 585 billion).
· 2% Transfer Fees: Wallet-to-wallet transfers now attract a 2 percent fee, not the 10% that Buy/Sell still charges.
· Non-partnered exchanges can now be blocked, which gives SafeMoon control over Listing with exchanges.
SafeMoon V1 charged users of its token a 10% fee for every transaction they executed. The 10% fee was split two ways. The first 5% was divided equally between SafeMoon development/marketing and SafeMoon’s reserve (liquidity pool), while the second 5% was spent on a concept the platform calls “Reflections.” However, in V2, this has also changed. SafeMoon now splits the 10% fee as follows:
· Reflections: 4% of the fee is distributed to all existing SafeMoon token holders.
· LP Acquisition: 3% is added to the SafeMoon liquidity pool.
· Token Burn: 2% of the fee is burned to create scarcity.
· Growth Fund: 1% is added to the SafeMoon Ecosystem Growth Fund.
All of the above points are geared towards enabling SafeMoon to meet its primary goal, which is to provide a novel solution to the problems of mining rewards, farming rewards, and the challenges developers face in attracting liquidity to decentralized exchanges. The core concept around which SafeMoon’s solution revolves is Reflections.
What exactly are reflections?
Reflections.
When you wade through SafeMoon’s jargon, you realize that Reflections are staking rewards. It is a form of passive income that holders of the SafeMoon token get as a reward for holding on to the token long-term. Like all proof-of-stake platforms, SafeMoon also employs a pro-rata strategy to distribute rewards to its token holders – essentially, the higher your holdings, the higher your share of the reflections.
Rather than emphasizing mining, which SafeMoon’s development team agrees is detrimental to the environment, users support SafeMoon token’s liquidity on decentralized exchanges by swapping BNB tokens for SafeMoon tokens and holding on to them. As a reward for holding on to the tokens, they get a share of the fees collected from users transacting with their SafeMoon tokens.
While SafeMoon makes a big deal out of reflections, the reality is that there is nothing unique about this method of rewarding liquidity providers for making their funds available to a decentralized exchange. The only difference is that decentralized exchanges typically promote the rewards, collect the fees, and then distribute a share of the fees as rewards to liquidity providers. On the other hand, since SafeMoon is a new currency and its use is limited, it takes the front seat to promote its coin and attract investors. Hence the relatively high 10% transaction fees.
Burning Tokens.
Burning tokens is another method that SafeMoon applies to reward holders of its token. However, unlike reflections, this is an indirect method of rewarding SafeMoon token holders.
SafeMoon emphasizes the value of burning tokens repeatedly throughout its website and documentation because burning is key to creating scarcity, and scarcity is essential for the market value of the SafeMoon token to rise.
In SafeMoon V2, 2% of all fees accumulated will be burnt to create scarcity. The method used for burning is similar to what other cryptocurrency projects use. A burn wallet was made at SafeMoon’s inception. The burn wallet, wallet 0x0000000000000000000000000000000000000001, has no seed phrase, which means that all SafeMoon tokens sent to the address can never be recovered. So, whenever the 2% fees are sent to this address, they are permanently removed from circulation.
Going by data provided by SafeMoon, the burn wallet currently holds the most significant amount of SafeMoon tokens – about 43% of the total SafeMoon token supply. The burn wallet powers the deflationary aspect of the SafeMoon ecosystem and will play a key role in stabilizing and increasing the token’s value over time.
SafeMoon: The Switch from V1 to V2.
SafeMoon recently made the upgrade from V1 to V2. According to the developers, the primary reason for the upgrade was that “the SafeMoon V1 Contract was not developed by the SafeMoon Team and because of this the code was very restricting and didn't look to help SafeMoon's true vision and goals. So, in doing so the Team Created SafeMoon V2 (0x0000000......) this new contract has been developed as the core of SafeMoon's future. This contract brings a wide range of features and just provides the team a level of control that didn't have with version 1.”
Some of the benefits of making this upgrade are as follows:
· Flexibility: SafeMoon will be able to employ smart contracts more freely within the SafeMoon ecosystem by "whitelisting" specific contracts to reduce fees from 10% to 2%. (Such as for commerce uses). This will also allow the company to incorporate more products that SafeMoon powers.
· Enhanced security: Because of its ability to blacklist, SafeMoon can be more "reactive" to dangers that interact with its smart contract.
· Lower Rates: SafeMoon will be able to reduce the 10% buy/sell tax rate to 2% for all whitelisted contracts, thanks to the ability to whitelist specific contracts. SafeMoon can now be used as a "utility token" rather than just a holding token.
· Increased volume: SafeMoon projects increased volume for the V2 SafeMoon token due to the lower rates it now offers.
· Autonomy: SafeMoon's V2 update will provide the developers more autonomy and control over their liquidity pool and the opportunity to expand their ecosystem's pairing options.
3 Reasons Why SafeMoon is Not a Gamechanger
Its Whitepaper is Too Vague.
SafeMoon’s whitepaper is too short and too vague for a project which claims to want to put a token in the hands of everyone who wants one. The whitepaper is 100% focused on the tokenomics of the project, neglecting details vital for any project – such as the purpose, scope, and intended use of the token.
Extensive analysis of the content on the website also proved futile. There is no way to tell what SafeMoon’s utility is precisely. The company talks about launching a Decentralized Exchange of its own, integrating the token for use in commerce, charity projects, NFTs, and the metaverse. Still, there is no documented plan for the token’s exact purpose and a precise timeline for when the commerce, NFT, and metaverse projects will be launched.
A whitepaper should go into extensive detail regarding the purpose of the project, provide a timeline for the actualization of the developer’s goals, and note milestones that are being targeted so that stakeholders can follow along and monitor progress.
No Unique Value Proposition.
SafeMoon uses beautiful language to promote its reward mechanism, but at its core, it is just a proof-of-stake platform that rewards users for “staking” their tokens long-term. It also encourages users to accumulate more of its token by attaching higher rewards to higher token holdings, similar to what other proof-of-stake platforms already offer.
Secondly, there is nothing novel about accumulating rewards by capturing a percentage of fees and storing it in a rewards pool to be distributed to users. Other platforms currently do this, even decentralized exchanges.
Until SafeMoon improves its whitepaper and furnishes the public with details, it is hard to fathom what unique value the project is bringing to the table.
Short-term Gains Don’t Equal Long-term Value.
Although Safemoon's price rose 2,000,000% during the early weeks after its launch, that isn’t an indicator of future success. The market price chart on CoinMarketCap reveals a sudden rise in growth, from $0.00000002 per token on 12th March 2021 to $0.0000118 per token on 20th April 2021. But the price has steadily declined since then. It is trading for $0.0000005102 per token at the time of writing.
While the current price is still a significant improvement from its trading price in the early days, the reality is that the people who have profited the most from SafeMoon are likely to either be developers, friends and family of the developers, or the earliest investors into the project.
This reality is further compounded by the fact that there are about 18,000 cryptocurrencies in existence today, and they are all jostling for the attention of investors.
Conclusion.
According to the Motley Fool, “As it stands right now, Safemoon has no purpose. A third-party audit found a major issue with its liquidity pool that the developers haven't fixed. And even though the manual burns are supposed to increase the price, that hasn't happened. Safemoon definitely isn't a safe investment, and it probably won't go to the moon, either.”
SafeMoon currently has a market capitalization of $300,937,424, so it cannot be written off entirely. However, the fact that the most critical feature of the token – utility – is still undetermined makes it hard not to consider the project a pump and dump designed to make its developers wealthy. If that was the goal all along, the developers have achieved their aim. That would also explain the excessive vagueness and lack of details about what the token is meant to do and how it creates unique value for the broader crypto industry.
The SafeMoon development team continues to promote features it intends to launch in the future. Still, it remains to be seen if any of those features and functionalities will see the light of day.
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