Safemoon Crypto: Worth Investing Or Just Another Scam?

SafeMoon is a relatively new cryptocurrency that launched in March 2021. It has gained significant attention due to its unique features, including a 10% fee on transactions and a token burn mechanism. However, SafeMoon has also faced criticism and legal issues, with some comparing it to a Ponzi scheme or pump-and-dump scheme. This paragraph will discuss the pros and cons of investing in SafeMoon, including its high-risk speculative nature, lack of liquidity and volatility, passive income potential, and lack of real-world utility.

Safemoon's extreme volatility and illiquidity

The fact that Safemoon charges fees to discourage selling also contributes to its illiquidity. The 10% fee on selling, with 5% redistributed to existing token holders and 5% directed to wallets in Binance Coin (BNB), discourages investors from selling their tokens, which can lead to a price crash. This is a very different approach from traditional mining rewards, where early adopters tend to earn more rewards.

The design of the token, with its focus on discouraging selling, has produced a loyal group of early investors but has also drawn criticism. Some analysts believe it is a pump-and-dump scheme, where early buyers will pump up the price and then dump their coins, driving the price back down. This happened in March 2023 when hackers exploited a security flaw in the smart contract of Safemoon's liquidity pool, causing a drop in the token's price. After negotiations, the hackers returned only 80% of the stolen liquidity, keeping $2 million worth of tokens.

The extreme volatility and illiquidity of Safemoon make it a very high-risk investment.

The 10% fee for selling Safemoon

One of the most unique features of Safemoon is the 10% fee charged on every sale. This means that if you sell 100 million Safemoon, 10 million will go towards the fee. The fee is split in half, with 5% being redistributed to all existing owners of Safemoon and the other 5% being used for a liquidity pool with Safemoon and Binance Coin (BNB). According to Safemoon's white paper, this 10% tax is designed to reward long-term holders and stabilise the price.

The other half of the fee is used to provide liquidity to the Safemoon and Binance Coin pair. 2.5% of the 5% that is sent to liquidity pools is converted into Binance Coin to ensure the liquidity of this pair. This helps to create a solid price floor for both buyers and sellers.

The lack of a real-world purpose or competitive advantage

Safemoon is a relatively new cryptocurrency that has gained serious attention since its launch in March 2021. However, one of the biggest criticisms of the crypto token is that it lacks a real-world purpose or competitive advantage.

Firstly, it is important to note that Safemoon does not have any utility or technological advantage over other cryptocurrencies. It does not offer any improvements in transaction speed, security, or other features. This means that Safemoon is purely reliant on its popularity to drive its value, which is not a sustainable long-term strategy.

Secondly, Safemoon's value is highly dependent on its branding and social media presence. While it has successfully generated a cult-like following and its brand has spread like wildfire online, this is not a sustainable competitive advantage. Other cryptocurrencies with similar meme coin characteristics, such as Shiba Inu and Dogecoin, have also been able to capitalise on the power of online communities and internet culture.

Thirdly, Safemoon's unique features, such as its fee structure and token burns, may not be enough to set it apart from other cryptocurrencies. Its 10% fee for selling tokens is intended to reward long-term holders and stabilise the price, but it also discourages investors from selling and makes the market less liquid. Its manual token burns, which are intended to reduce supply and increase price, are not pre-built into the protocol and are instead done at the development team's discretion, which could potentially allow for supply and price manipulation.

Finally, Safemoon's future plans, such as releasing a Safemoon app, wallet, video game, and exchange, seem to be more style than substance. Many of these ideas are vague and lack concrete details, and some seem to be intended purely to generate hype. For example, its plans to integrate with African markets and turn Safemoon into "the fuel for the freedom of the unbanked" through "Project Pheonix" have been met with scepticism and legal issues.

In conclusion, while Safemoon has gained a lot of attention and seen some success in the short term, its lack of a real-world purpose or competitive advantage makes it a highly risky and speculative investment.

The high-profile influencers endorsing Safemoon

Rapper Lil Yachty and Backstreet Boys member Nick Carter also promoted Safemoon on social media. YouTuber and boxer Jake Paul, who has 20 million subscribers, has also backed Safemoon on Twitter. Paul is a supporter of other cryptocurrencies like Dogecoin and Bitcoin and has called crypto "the future".

YouTuber MrBeast, who has over 60 million subscribers, is an investor in "Refinable", a non-fungible token (NFT) company that sells tokens.

In a class action lawsuit brought against SafeMoon LLC and its CEO in May 2022, Jake Paul, Nick Carter, Soulja Boy, Lil Yachty, and YouTuber Ben Phillips were all named as co-defendants. The complaint alleged that the defendants misled investors by consistently assuring them of the token's imminent price increase while selling off their holdings.

The centralized ownership of Safemoon

The centralization of ownership also goes against the very essence of blockchain technology and cryptocurrencies, which are intended to be decentralized and distributed ledgers. In a decentralized system, no single entity or group should have a disproportionate level of control, as it undermines the core principles of transparency, trustlessness, and immutability that underpin blockchain technology.

The concerns about centralized ownership are heightened by the fact that Safemoon is built on the Binance Smart Chain, which itself has been criticized for being centralized. Binance, as the validator of the chain, has absolute control over the blockchain and can make unilateral decisions about its direction. This further adds to the concentration of power and influence in the hands of a select few.

The combination of centralized ownership and a centralized platform raises serious questions about the level of trust and security that Safemoon can offer to its investors. It also exposes the cryptocurrency to additional regulatory risks, as regulators are increasingly scrutinizing the crypto space to protect consumers and prevent fraudulent activities.

Furthermore, the centralized ownership structure may limit the long-term success and viability of Safemoon. Cryptocurrencies are often touted for their democratic and decentralized nature, which allows for greater participation and distribution of power. By concentrating ownership in the hands of a few, Safemoon may be limiting its ability to attract new investors and could face challenges in maintaining a diverse and engaged community.

Lastly, the centralized ownership of Safemoon has led to accusations of it being a Ponzi scheme or a pump-and-dump scheme. Some analysts and critics have warned that the structure of Safemoon appears designed to benefit developers and early investors at the expense of later buyers. The 10% fee charged on transactions, with 5% redistributed to existing token holders, can create an incentive for early investors to promote the cryptocurrency and drive up prices, only to later sell their holdings and "dump" the tokens on unsuspecting buyers, causing a price crash.

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