SafeMoon has an ambition to give its holders high rewards thus far unprecedented in the crypto industry. Its tokenomics have made this possible by charging large fees to those wanting to buy or sell the cryptocurrency.
But critics have concerns over the project as they claim it looks remarkably similar to a Ponzi scheme. The system behind SafeMoon allows early investors to profit off newcomers and discourages anyone from selling.
The cryptocurrency has undergone a huge update since these criticisms came to light, which dramatically changed how many SafeMoon (SFM) coins there are. However, the transformation does not seem to show any substantial change to its controversial tokenomics.
How many safemoon coins are there and does safemoon have a future? Let's take a look.
How the SafeMoon (SFM) token works
SafeMoon has boomed in popularity and price, but the decentralised finance (DeFi) token only lauched in 2021, making it relatively new to the crypto world. The cryptocurrency wants to simplify the process of DeFi with the added benefit of security to yield farming and liquidity. However, its main aim is to implement high, passive rewards that can combat any pressure on SafeMoon (SFM).
The secret behind these passive rewards lies in SafeMoon’s tokenomics. One quadrillion SFM tokens were created when it launched. However, this is not how many SafeMoon coins exist now, as an astonishing 223 trillion were immediately burned by the developers. The remaining 777 trillion of the tokens were released to the community through an event on DxSale.
The burning of SafeMoon does not stop there. For every transaction, there is a 10% fee charged. This fee is split among four different functions. One fifth is burned, adding to the growing amount of disposed tokens. Another two-fifths are put into a process called reflections, which redistributes the amount to all SFM holders. Three-tenths are then added to liquidity, helping SafeMoon achieve a stable market.
Finally, the last tenth is added to something called the SafeMoon Ecoystem Growth Fund. However, there is not much detail available about this fund.
The benefits of SafeMoon tokenomics
The tokenomics behind any cryptocurrency is the foundation of the project. The system behind SFM is not just intended to complement the project. It is necessary for SafeMoon to meet its ambitions.
The SafeMoon project is attractive to investors due to its annual percentage yield (APY), the amount of interest gained by locking in a cryptocurrency. Crypto accounts offer an average annual percentage yield (APY) of 7.5%, according to the Benzinga website. SafeMoon allows users to earn up to 80% APY, more than 10 times the average.
The APY amount depends on the trade volume of the token, so fewer people selling means higher rewards. The DeFi platform can achieve these high APY rates because its 10% fee encourages holding rather than selling.
Another integral factor to the SafeMoon tokenomics is burning. The project launched with an extremely high number of tokens, even after the initial burn. Building a constant stream of burning into its tokenomics means that SFM should become scarcer and potentially more valuable.
Yet, it seems like the developers regretted setting such a high genesis amount, even after the huge initial burning.
Safemoon V2
The DeFi platform and cryptocurrency underwent a transformation on 30 December 2021 after it upgraded to SafeMoon V2. The purpose of the update was to give the SafeMoon developers more control over the project, which they did not have with its first contract.
The main feature this update brought was consolidating the amount of SFM tokens in circulation. For every 1,000 V1 SafeMoon tokens, holders will get one token in the new V2 SFM.
The update also implemented a slight change to the fees. The 10% charge for buying and selling the token is still present. However, users will only be charged 2% for trading SafeMoon to different wallets.
How many SafeMoon coins are there in circulation?
The initial burn and constant stream of removed tokens brought the supply down to 583 trillion tokens in May 2021. Thanks to the consolidation in the V2 update, the number of circulating tokens has plummeted below 600 billion SFM. As of 31 January, there were 575 billion SFM in the world.
This has dramatically affected its price as well. SafeMoon’s token launched at the beginning of March and was hovering around $0.00000003. It saw some price surges in its first few months but never managed to get past $0.00001. It gradually fell throughout the rest of 2021 and by 30 December, the day of the upgrade, it had stooped to $0.000001 (one thousandth of a cent).
Since upgrading to SafeMoon V2, the price has shot up. It reached its all-time high on 4 January 2022 at $0.007. It has fallen and at the time of writing is currently hovering around the $0.001 mark, one tenth of a cent.
Is SafeMoon a scam?
SafeMoon’s price surges and high passive rewards have catapulted it into the mainstream. But critics have started comparing it to a Ponzi scheme, a type of investment fraud that takes money from recent investors and gives it to the early investors.
This comparison is fuelled by the 10% fee, the function that powers the platform. The earlier investors profit off new investors paying this fee and buying the coin. This discourages people from selling the coin, as not only do they stop earning the passive rewards but they must pay the 10% fee.
CoinBureau said: “Calling it a Ponzi scheme is actually accurate since it follows a model whereby the profits made by early adopters are based on others paying more for the token at a later date. And the distribution of the selling fee definitely looks like the pyramid type-structure you’d see in a Ponzi scheme.”
Bloomberg has also raised concerns over the burning of the tokens, especially the manual burning implemented by the SafeMoon team. Jasper Lawler, the head of content and research at London Capital, told Bloomberg: “The manual burns, alongside the company having a pretty large stake in the coins, just speaks to me of a manipulation risk.”
Centralisation problems were found with the DeFi token as well. The CertiK audit completed on SafeMoon V1 found there was privileged ownership. The founders have the ability to exclude addresses from the 10% fee, among other significant powers.
Summary
SafeMoon’s high APY and token price surge may be too good to be true. The project has managed to achieve this through its controversial 10% fee and manual burning.
From manipulation to Ponzi scheme fears, critics have been raising their concerns over this. It is not a good look to show new potential investors. Even after the latest update, these concerns are still present.
How many safemoon coins are there and does safemoon have a future? Now you get a better understanding about this topic.
