Exploring the SafeMoon Protocol

Written by Ivan on Tech

Apr 29, 2021

The last decade has seen the crypto market grow at an incredible pace. We have seen the likes of Bitcoin and Ethereum grow to become well-known in all corners of the world. As of early 2021, interest in crypto is arguably at an all-time high. The crypto market’s most recent bull run serves as an incentive to businesses and startups to create new cryptocurrencies that take advantage of the surging market. One relatively new and interesting addition to the crypto market is that of SafeMoon. Let’s take a closer look at what SafeMoon brings to the table.

The launch of SafeMoon was comparatively recent, with the token launching at the beginning of March 2021. The token’s price has surged since SafeMoon’s launch, which has caught the eye of many traders. However, since SafeMoon is such a new addition to the market, there are still some question marks regarding the token. Therefore, we will try to bring some clarity to those interested by trying to explain what SafeMoon is.

If you want to learn more about other cryptocurrencies beyond SafeMoon, you should make sure to enroll in Ivan on Tech Academy. Ivan on Tech Academy is the world’s largest blockchain academy and offers dozens of in-depth cryptocurrency courses on everything from DeFi to Chainlink. What are you waiting for? Join today!

What is SafeMoon? 

As we mention in the previous section, SafeMoon launched early in March this year. This means that there is not much previous data and information available regarding this currency. Since there is a lack of information here, it is arguably hard to justify an investment in SafeMoon. However, we have some information available provided by the creators, and we are going to take a closer look at it in this article. 

SafeMoon is a US-based protocol that has the slogan ”Safely to the moon”. The slogan is inspired and a play on words that is closely connected to Dogecoin and its community on Reddit. The original phrase is “Dogecoin to the moon”, a phrase that was first coined on the WallStreetBets subreddit to hype up the price of Dogecoin. 

Currently, the market cap for SafeMoon sits around $2.5 billion. Along with this, the value of one token is well below the price of one US dollar at about $0.000004328. The market cap of $2.5 billion is distributed between almost 1.4 million holders and the SafeMoon protocol has a liquidity pool of around $221 million. 

Furthermore, SafeMoon is supposedly meant to be held for an extended period of time and is, therefore, prone to a hodl strategy. The design and the incentives that SafeMoon provides are attempts to keep buyers from selling, a point further elaborated on in the SafeMoon protocol. 

How does SafeMoon work — SafeMoon Protocol

The SafeMoon protocol consists of three key components: liquidity pool acquisitions, static rewards, and manual burns. According to the team behind SafeMoon, it is way too common that people fall into something they call an APY (annual percentage yield) liquidity provider farming trap. An APY liquidity provider farming trap is where early adopters push out buyers since they have the ability to receive higher staking rewards.

Furthermore, almost all tokens suffer from a valuation bubble which inevitably bursts and collapses the price in the process. These are also the two reasons that SafeMoon has implemented the concept of static rewards, also called reflections. This concept can help eliminate the danger of falling into a liquidity provider-farming trap.

Static Rewards

So, why are static rewards used to solve the problems that arise when new tokens are introduced to the market? The first mechanism in this system is that the reward amount is conditional and based on the number of tokes included in a trade. This is because it actually removes some of the pressure from early buyers selling their tokens after farming high annual percentage yields. 

Furthermore, the reflect mechanism incentives owners to hold on to their tokens. This is an effect of providing higher kickbacks based on the number of tokens held. 

Manual Burn

Another essential part of the protocol is the mechanism for burning tokens. SafeMoon believes that a controlled method of burning tokens is preferred to a continuous burn on a protocol. The reasoning behind this is that a constant burn of tokens is not finite and is impossible to maintain efficiently. 

For this reason, SafeMoon has decided to opt for a mechanism that controls the burn so that the community can be rewarded and informed. This means that the burn will be manually executed by their team and that the conditions can be tracked and advertised to the owners. The central part of their method for burning tokens is to keep owners engaged in the long term. This is done by rewarding them for holding their tokens.

They also disclose exactly how many tokens have burned on their website to ensure complete transparency in the system. This also helps identify the number of tokens that are currently in circulations with greater accuracy. 

LP automation

SafeMoon’s Automatic Liquidity Pool is described as their ”secret sauce”. There are two reasons for this, and it comes in the form of two benefits for the owners. The first one is connected to the burning mechanism, and that is that both the buyer and seller of a token are taxed, and this tax contributes to the liquidity pool, which in turn creates a price floor.  

Furthermore, the penalty when trading SafeMoon tokens is a hindrance for arbitrage, which then secures the volume of SafeMoon as a reward for the owner who keeps holding their tokens. The increase in the liquidity pool creates balance and stability by adding the tax and increasing the overall liquidity of the token. Doing this also supports the price floor of the token, which is beneficial for the owners. 

These functions are different from the burning mechanism since it supports the owners and the token in the long term. Meanwhile, the burning of tokens only supports the owners in the short term by decreasing the supply. 

Furthermore, as the liquidity grows more prominent, it will help maintain the price and keep the price floor intact and stable. The reasoning for this is to avoid a drastic decrease if the huge owner decides to sell later in the game. Simply, this means that the automatic liquidity pool has the primary goal of avoiding some of the pitfalls that other DeFi tokens have experienced in previous cases. 

Transaction Tax

Every new transaction is taxed 10%, and this percentage is split into two different parts. Both of the parts consist of five percent. From the first part, all existing holders receive an equal part of the five percent.

The other 5% are then split again into two equal parts where 2.5% are sold into BNB, while the additional 2.5% are paired with the previously mentioned BNB and then added as liquidity on PancakeSwap

How to Acquire SafeMoon

So, now that we have a better understanding of what SafeMoon is and how it works, we can go into how to acquire this token. According to their own website, SafeMoon suggests PancakeSwap as the way to acquire the tokens. The instructions for buying SafeMoon tokens are as follows: 

  1. The first step is to download the Trust Wallet application. 
  2. After this, the second step is to acquire BNB or BSC. The reason for buying these is that they can be swapped for SafeMoon tokens. 
  3. After the BNB or BSC are bought, you can find the dApps tab at the bottom of Trust Wallet. In this tab, you will find PancakeSwap. If you happen to be on an iPhone, it might be necessary to enable the trust browser and then use the browser tab instead. And if you are on a computer, you can also use the ”Buy Now” button on their website. 
  1. The fourth step is to select SafeMoon. This you can do by clicking the ”Select a currency” and enter SafeMoon’s address in the search field.
  2. The fifth step is to set the slippage. Clicking the cogwheel allows you to set the slippage rate. SafeMoon suggests to put the slippage at about 11-12%.
  3. The sixth step is to select the amount you want to buy and then simply press the swap button. 
  4. Lastly, all that you need to do is to confirm the transaction. 

HODLIn the last step, SafeMoon also mentions ”HODL”. This might not be a familiar term to some people, but it is a type of investment strategy. HODL is a long-term strategy where the owners basically hold on to an asset for an extended period of time. The reasoning behind this strategy is that cryptocurrencies, in general, are volatile meaning that it is hard to time the ups and downs of an asset.

However, looking at some of the more dominant crypto assets, like Bitcoin, they have always seen growth in the long term. So, in some cases, the hodling strategy can be efficient since people do not need to worry about the fear of missing out (FOMO) or selling in a panic when an asset falls. 

Furthermore, the SafeMoon protocol takes 10% from every transaction, which means that it is not beneficial to sell and buy tokens all the time. Therefore hodling, in this case, is a preferred strategy not to lose assets through the transaction fees. 

The Future of SafeMoon

Although the SafeMoon token has had a relatively significant price development since its launch almost two months ago, this is not where it ends. SafeMoon has developed several goals for 2021 where they explain some of their future plans. 

In the second quarter of the year, SafeMoon wants to complete their SafeMoon application, wallet, and games. Furthermore, they will begin to develop an NFT Exchange and integrate SafeMoon with African markets. SafeMoon will also expand their team and create a UK/Ireland office. 

In the third quarter, SafeMoon plans to finish their education application and start their own charity projects. They will also finish their NFT Exchange and start releasing a video game with SafeMoon integration. In the third quarter, they will also further expand their team with an additional 25%. Furthermore, they will also begin integration with other large exchanges such as Binance and Mandala

And in the fourth and the last quarter of 2021, SafeMoon plans to finish their charity projects as well as the SafeMoon exchange. They will also ensure that they finish integrations with their first African market and start further development of integration with other markets in Africa as well. 

SafeMoon also plans to open an office in Africa and hire people from these markets to create jobs. And lastly, SafeMoon aims to establish a SafeMoon scholarship in this last quarter of the year. 

Overall it seems that SafeMoon has some ambitious goals for 2021, and it appears that they have plans on expanding the organization. It will be interesting to follow how SafeMoon takes this plan and puts it into action.

SafeMoon Summary

The crypto market’s constant growth has provided ample demand for new currencies and DeFi protocols. Only about two months ago, SafeMoon was introduced to the world, and the growth in terms of price has been high since then. As of now, the market cap of SafeMoon is about $2.5 billion, and the protocol holds liquidity of around $221 million.  

The SafeMoon protocol consists of three main parts; static reward, manual burn, and automatic liquidity pool acquisition. These are all important parts of the protocol, which ensures the security of the price of the SafeMoon token. Furthermore, these mechanisms provide the owners of the tokes with incentives to hold on to their assets instead of selling. Selling and buying tokens results in a 10% tax from the system, which is awarded to the liquidity pool as well as the current holders of the tokens. This is quite a high fee for transactions which means that it is more beneficial for people to hodl their assets. 

Furthermore, SafeMoon has ambitious plans for the future and they are still under development. They plan on developing exchanges, applications as well as expand their organization all within 2021. It will be interesting to follow their journey and see if they manage to achieve their goals. 

If you are interested in the world of crypto and blockchain technology, feel free to browse the number one blockchain education platform Ivan on Tech Academy. Here you will find several different blockchain courses suitable for both novices and more experienced developers.

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