What Is Safemoon and How Does It Work?
Safemoon is a new cryptocurrency token that hit the market in March 2021. The cryptocurrency was created using Binance’s blockchain technology. Safemoon token received endorsements from different celebrities, which saw a rise in its popularity.
The Safemoon cryptocurrency incorporates a distinctive feature where you are charged a 10% fee when you sell the token. This fee is charged on top of the other costs that a cryptocurrency exchange will charge for facilitating the token’s sale.
According to Safecoin developers, the fees are meant to discourage selling and encourage the holding of the cryptocurrency. The crypto takes the funds from costs and sales and gives 50% to the holders. This is a distribution called “reflection.” The other portion is directed to a liquidity pool that maintains Safemoon’s price stability.
Who Created Safemoon?
So, who is Safemoon’s creator? Six developers created the cryptocurrency. It was later launched on the BSC blockchain in the first quarter of 2021. It is not apparent who the owner of Safemoon is. The company has listed a team of six leaders.
The chief technology officer is Thomas Smith, while the community manager is Trevor Church. John Karony, is also a Safemoon creator and works as the CEO. He was an analyst for the US Department of Defense.
Thomas Smith has previously worked with companies that deal with decentralized financial products and blockchain.
The chief operating officer for Safemoon is Jack Haines-Davies. He has formerly worked for Ben Philips and LikeandShare. However, it is not very clear what they are all about.
How Does Safemoon Works?
Safemoon was designed on the Binance Smart Chain Blockchain. Binance Safemoon was made in such a way it encourages long-term investments by discouraging selling. Sellers are charged a 10% fee and half of this amount goes to the existing holders. The other half is kept in the Safemoon liquidity pool. This is to maintain price stability.
Certik, a security firm on matters blockchain, conducted an audit on Safemoon transactions and found that the owners get tokens generated from the liquidity pool. As part of the fee, this gives the owners tokens control. This was a significant issue, according to Certik, who advised Safemoon to improve its security features.
The developers of Safemoon also reduced the amount of Safemoon manually. This is usually to reduce supply and ensure high prices. After its introduction in March, the prices of Safemoon soared, with its highest value being $0.000014 in April. Safemoon transactions during the period were at an all time high. This value has since fallen significantly since that period.
Features of Safemoon
Safemoon sets itself apart from other cryptocurrencies due to various reasons. The cryptocurrency was created in a way that resists volatility. Some of the Safemoon features are reflection and LP acquisition.
Safemoon reflection is a feature where static rewards, referred to as reflections, attempt to solve the mining rewards problem. This is done in two ways:
- The amount of reward is dependent on the volume being traded. This keeps the selling pressure brought by early investors selling their coins in check.
- Safemoon daily reflections ensure the ones holding the tokens get higher payments depending on the number of tokens they own.
Safemoon’s liquidity pool is its secret sauce. The feature creates a solid price floor for the sellers and buyers.
Safemoon LP design is meant for stability in the long run. The penalty for selling coins in Safepool remains its unusual feature. The project’s white paper indicates this is intended to prevent significant dips when initial investors decide to sell their tokens later on. This ensures the prices do not fluctuate very much.
Pros of Safemoon
Valuable Crypto Brand
Any cryptocurrency must develop a loyal following to remain relevant and gain traction continually. Safemoon coin value skyrocketed after its launch due to great branding. Safe moon branding is top-tier and easily competes with the other 13,000 cryptocurrencies in the market. The cryptocurrency will hugely depend on branding to compete with other notable coins even in the coming years.
The platform is designed to punish selling and reward holders of tokens. Every time an investor sells their tokens, holders can generate passive income. This is usually when the value weakens and the pressure to sell kicks in. The investors who hold their tokens are rewarded through passive income. Investors benefit from Safemoon passive income in the long run.
Dave Portnoy and Other High Profile Investors
Safe moon has utilized some high-profile celebrities to ensure its influence is widespread. The founder of Barstool Sports invested $40,000 in Safemoon in May. Dave Portnoy Safemoon investment highly increased other people’s faith in investing in cryptocurrency. Jake Paul is another notable celebrity who endorsed Safemoon after it was launched.
Cons of Safemoon
Liquidity and Volatility
Like any other altcoin, there is the risk of high levels of lack of liquidity and high levels of volatility. The cryptocurrency charges fees that are aimed at preventing selling. It is also not traded in the big cryptocurrency exchanges such as Gemini or Coinbase Global Inc. The liquidity of safemoon is therefore not as high as other cryptocurrencies. Also, the volatility of Safemoon has been heightened, with the value dropping more than 80% since skyrocketing a month after its launch.
The cryptocurrency does not have any advantage over the other cryptos in terms of security, speed, or other features. Safe moon has no utility since no major businesses accept it as a payment method. It is also hard to trade it for other cryptocurrencies or hard currency since it does not trade on the leading crypto exchanges that are centralized.
Major cryptocurrencies such as Bitcoin have been alleged to be Ponzi schemes by critics. But the Safemoon centralized ownership has caught the attention of critics the most. For instance, the CEO is reported to have more than 50% of the coin’s liquidity. There are claims that the insiders are getting large sums in passive income. There isn’t concrete evidence that Safemoon is a fraudulent scheme, but like many other altcoins, it seems developers and early investors benefit at the expense of others.
Is Safemoon Safe?
You may be wondering, is Safemoon safe to buy? After weighing your options, the decision to invest in cryptocurrency will solely fall into your hands.
However, Safemoon has serious downsides. First, the cryptocurrency does not have any utility, and its use looks pretty irrelevant. It is not clear what the long-term purpose of the altcoin is or what the goal was in the first place.
There have been many speculations of Safecoin being a Ponzi scheme, with another problem being centralized ownership. This may indicate some signs of pump and dump. All we can say is some might benefit from holding on to their tokens or through a well-timed bet, but the majority will lose.
Is Safemoon a Good Investment?
Again, whether Safemoon is a good investment or not lies in what you are aiming to achieve. Since its highest spike, the cryptocurrency has also experienced a significant fall in value. However, because the cryptocurrency does nothing and future expectations are pegged on other buyers, Safemoon buying may not be a good investment.
Investing in any crypto is highly risky. All cryptocurrencies exhibit high levels of volatility, and you need to do thorough research before dipping your toes and investing. You can also consult a professional advisor if you are convinced it is an investment you want to make. Above all, always ensure the money you are using to trade is money you can afford to lose.