Understanding SafeMoon.

 

What is SafeMoon?

 

'Safemoon' is a form of cryptocurrency where it rewards consumers that hold onto Safemoon tokens while discouraging those that sell. Specifically, sellers will suffer a 10% fee after selling. As a result, Safemoon owners or holders benefit from 5% of that fee going to their pockets. 

From the White Paper 

 

Goals of Safemoon 

 

SafeMoon aims to prevent the high APY( Annual Percentage Yield) farming trap through the mass adoption of static rewards. 

"With the explosion of DeFi we have seen too many new cryptocurrency prospectors get sucked into a high APY LP-farming trap, feeling hopeless as they are pushed out by earlier buyers with higher staking rewards... almost always the token suffers from the inevitable valuation bubble, which is then followed by the burst and the impending collapse of the price."

So why have SafeMoon adopted static rewards? First, the alleviation of downward selling pressure on the SafeMoon token 'caused by earlier adopters selling their tokens after farming crazy high APY’s.' Static rewards will deliver reward amount conditional upon the volume of the SafeMoon token being traded. Additionally, the reflect mechanism of static rewards encourages SafeMoon token holders to hold to 'garner higher kick-backs which are based upon a percentage carried out and dependant upon the total tokens held by the owner.'

Other Features of SafeMoon 

 

Manual Burns 

A burn strategy implemented by the SafeMoon team aims to benefit and reward holders for the long term. The manual burns will be transparent to holders as the 'conditions of the manual burn and the amounts can be advertised and tracked.' Also, 'the total number of SAFEMOON burned is featured on our readout located on the website which allows for further transparency in identifying the current circulating supply at any given point of time.' 

 

What is a coin burn? 

A coin burn is when a token of a particular cryptocurrency is sent to an account where it is unusable. Why do this? With the decrease in token supply, the relative scarcity of the token increases. As a result, the token's value increases. 

 

Automatic Liquidity Pool (LP)

 

The secret sauce of SafeMoon? The Automatic LP aims to ease 'some of the troubles of current Defi reflection tokens.' The pool function acts 'as a two-fold beneficial implementation for holders.' The SafeMoon tokens are gathered from sellers and buyers and put into a liquidity pool, hence making a solid price floor. Furthermore, to reward holders, a penalty is applied as a form of 'arbitrage resistant mechanism,' securing the SAFEMOON volume. 

The addition of the liquidity pool would further stability from the supplied LP through the addition of tax to the token's overall liquidity. As a result, there is more support for the price floor and the overall LP increasing in the meanwhile. 

When SafeMoon token LP increases, price stability would correspond. This is an attempt to stop any potential large downtrends and volatile fluctuations, in the future, when any investor, with large amounts of tokens, decides to sell in the future. 

 

Critiques of Safemoon 

 

'Tom's Guide' perceives SafeMoon of being a form of the Ponzi Scheme. Specifically, any potential profits generated in the future depends on someone purchasing more for SafeMoon tokens than you further down the line. An additional criticism against SafeMoon is that the 10% selling fee and 5% redistribution fee structure may unfairly benefit consumers that have adopted SafeMoon tokens early. There is a perception that under this structure, early adopters would benefit more from 'subsequent sales' of the SafeMoon tokens.

 

Summary 

 

• Sellers get a 10% fee. Holders benefit from 5% of that fee going to their pockets. 
• Potential form of Ponzi Scheme 
• May unfairly benefit consumers that have adopted SafeMoon tokens early. There is a perception that under this structure, early adopters would benefit more from 'subsequent sales' of the SafeMoon tokens. 
• Manual Burns are transparent 
• Automatic LP is used to achieve easing of 'some of the troubles of current Defi reflection tokens.'