SafeMoon embodies meme token hype better than almost any crypto in history.
In just two months, SafeMoon has engineered $4 billion market value inflated by influencers like Jake Paul, Soulja Boy, and now Dave Portnoy.
SafeMoon’s pitch comes in many forms. It’s a:
- Self-generating liquidity pool,
- Fair launch DeFi token,
- Novel way to bank the unbanked.
But what SafeMoon resembles most is the crypto-powered Ponzi games once popular on Ethereum, like Proof-of-Weak Hands 3D (PoWH3D).
These games — which are now bleeding into the Binance Smart Chain ecosystem — are designed to mimic real-life Ponzi schemes.
However, crypto Ponzi games usually communicate the risks so that everyone is on the same page.
SafeMoon doesn’t do that.
SafeMoon wants to cure weak hands
Like other DeFi projects, SafeMoon relies on a liquidity pool to encourage holders to “stake” tokens to acquire more — similar to a bond that matures, but with a volatile crypto.
What SafeMoon claims to do differently is distribute what it calls “static rewards” to its now 2 million holders.
Static rewards push to alleviate downward sell pressure from earlier adopters, who are inclined to dump their tokens once yield falls.
SafeMoon’s static rewards are, more or less, a system that penalizes buyers for anything but holding their tokens.
Anyone that sends SafeMoon to another wallet is “charged” a 10% fee — half is burned and the rest given to other holders.
Supply and price, but where’s demand?
SafeMoon deployed with 1 quadrillion tokens (15 zeroes) and perpetually burns supply, alluding to rising scarcity.
Today, there’s roughly 584 trillion SAFE in circulation (after 223 trillion went to “devs”), which means it’s currently burning 2.9 trillion SAFE per day on average.
SafeMoon’s supply gimmick is integral to its value proposition: scarcity inflates as supply deflates, which implies value.
For comparison, XRP (a much older crypto with incredible amounts of supply), boasts a 100 billion supply limit.
Ethereum — while having no cap — has just 115 million ETH currently in circulation.
SafeMoon displays the dynamic between supply and price with a handy chart in its whitepaper. It shows SAFE’s price will always go up as supply goes down.
It’s true that SAFE’s supply is set to decrease. But the project’s bullish graph assumes there’ll always be rising interest.
Volume data suggests otherwise, but it did pick up after Portnoy’s conversion. Not to mention, the realities of supply and demand haven’t yet aligned with SafeMoon’s optimistic graph.
Indeed, SAFE’s price is not pre-programmed. It’s determined by market demand — exactly what makes celebrity endorsements so critical to SafeMoon’s success.
In any case, SafeMoon’s whitepaper paints only a vague picture. The project’s Medium blog likely has more detail, but it’s presently under investigation and inaccessible.
SafeMoon, founded by an FBI spook?
SafeMoon’s leaders don’t offer much more insight. The project’s most present faces are chief exec John Karony and Jack Haines-Davies, its chief operating officer.
The pair appear regularly on Twitch to “dispel FUD” and share updates.
On the surface, the streams echo community hangouts — akin to a My First Clubhouse — in which they ramble about SafeMoon’s success.
But SafeMoon’s founders have made some interesting comparisons about the state of their crypto and its purported trajectory.
“There’s individuals who took the risk early on and acquired SafeMoon and now they are reaping their benefit… it’s kinda like with Apple in the early days,” said Karony in a recent stream.
Karony — a US military veteran — appears to have set up the project’s LLC in Provo, Utah at a home address (Utah is ironically home to the most Ponzi schemes per capita in the US).
Most curiously, SafeMoon’s chief is also the CEO of data analytics crew Blue Triangle International, which has at least applied for government contract work and claims to have done business with the FBI.
But whether SafeMoon insiders formed a legal entity for their purportedly decentralized protocol in Utah for transparency, or simply didn’t think to incorporate outside of SEC jurisdiction, remains to be seen.
“It is not unusual for DeFi projects to elect to pick some type of corporate form,” Preston Byrne, partner at DC-based law firm Anderson Kill, told Protos. “Whether it’s advisable is another matter.”
Byrne said he generally struggles to reconcile competing claims: a project is “decentalized” but its management (including protocol updates) are pushed by a centralized “foundation” capitalized by large token sales which grant governance rights.
Leveraging YouTube work history
SafeMoon operation lead Haines-Davies is less visible.
However, according to LinkedIn, Haines-Davies managed UK-based YouTuber Ben Phillips — who has over 4 million subscribers — from November 2017 until March 2021.
SafeMoon launched that month. Phillips now regularly spruiks SAFE to his Twitter followers.
“Usually, the biggest question is whether there’s been any payment that an influencer has failed to disclose in a situation like this,” said a lawyer familiar with DeFi and first amendment law.
“If they haven’t disclosed and [the token is] potentially a security, you run into touting violations.”
Aside from influencers, SafeMoon looked to instil confidence with a recent audit from Singapore-based CertiK.
But SafeMoon’s results weren’t great. Most glaringly, CertiK discovered insiders built the protocol to reward a single “owner” address with significant sums of SAFE tokens over time.
SafeMoon’s founders have access to that crypto (worth $2.6 billion at press time), so a black swan event becomes significantly more likely, found CertiK.
CertiK suggested the project could mitigate that risk by assigning such privileged roles to multisig wallets, introducing a DAO, and even time-locking the centralized wallet.
Overall, CertiK flagged 13 issues, one marked “major” and one “medium.” A spokesperson told Protos the total number of issues is less important than the severity of each one.
“You’d rather see 50 informational issues than one critical issue,” they said.
SafeMoon responded in CertiK’s report: “Rug pulls or anything else is mitigated due to the fact that every member of SafeMoon would be subject to litigation and likely a swift prison sentence… outside of the law, our social lives would be in ruin.”
Yet, it attracts players
It’s ultimately difficult to decipher what SafeMoon intends. That’s likely the point.
The whitepaper lacks any real clarity, but the team has collected over $1 million in crypto (mostly BNB and BSC) to build a SafeMoon wallet.
Still, SafeMoon’s founders peddle lofty goals like “mass adoption” and rally the community to participate in a pseudo-secret campaign to boost demand called “Operation Pheonix.”
“A tidbit on Operation Pheonix,” said Karony in a live Twitch stream, “SafeMoon is going to be the fuel for the freedom of the unbanked.”
And so, just like the Ethereum-based Ponzi games that came before it — the earliest to buy SafeMoon hypothetically stands to make the most profit — but only if they can lure enough players to follow suit.
Edit 09:25 UTC: Clarified Karony’s role at Blue Triangle International in paragraph 31.