Popular crypto YouTuber Lark Davies tweeted a warning over the new Binance Smart Chain project SafeMoon. He likened its rising popularity to the now-defunct Bitconnect scam, saying the euphoria of gains is blinding users to “the obvious.”
Bitconnect arrived on the scene in 2016, promising high returns for holding, trading, lending, and mining its BCC token. But things began unraveling in January 2018 when Texas and North Carolina regulators issued a cease and desist order. Bitconnect has earned a place in history as one of cryptocurrency’s biggest scams. But, is Davies right to lump SafeMoon in with the same company?
Bitconnect was for a brief moment a top 10 #crypto, the people making money did not want to accept it was a ponzi, they made every excuse to justify it, and attacked anyone who stated the obvious.
Then it rug pulled and everyone lost big time. #safemoon is no different.
— Lark Davis (@TheCryptoLark) April 21, 2021
What is SafeMoon?
SafeMoon launched last month on March 14 with a debut price of $0.00000008. Since then, particularly over the last week or so, its price has mooned. SafeMoon is up +980% over the last seven days, hitting an all-time high of $0.00000919 yesterday.
Source: SAFEMOONUSD on CoinGecko.com
SafeMoon is an auto-generating liquidity protocol that rewards holders and penalizes sellers. It imposes a 10% penalty on sellers and redistributes 5% to existing holders, while it’s unclear who directly benefits from the other remaining 5%.
“5% fee is split 50/50 half of which is sold by the contract into BNB, while the other half of the SAFEMOON tokens are paired automatically with the previously mentioned BNB and added as a liquidity pair on Pancake Swap.”
The project describes itself as a “community driven, fair launched DeFi Token.” It talks about three simple functions, those being Reflection, LP Acquisition, and Burn.
Its whitepaper says “Reflection” relates to the concept of static rewards, which they say tackles the problem of falling APYs and encourages users to hold on to their tokens.
“LP Acquisition” relates to their mechanism of matching buyers and sellers, which they say creates a “solid price floor,” therefore minimizing price dips.
As the term suggests, ” Burn” relates to the burning of tokens, but in a documented and transparent way. The theory here is to reduce supply and therefore increase the value of tokens.
Some point out that the setup is similar to a Ponzi scheme. SafeMoon’s success relies upon more and more people buying in and holding – a model it encourages by penalizing sellers.
However, some have praised SafeMoon CEO John Karony for his willingness to hold AMAs and engage with the community.
Binance Smart Chain Rug Pulls
Binance Smart Chain (BSC) is gaining ground as a serious competitor to DeFi on Ethereum. The promise of cheap gas fees and quicker transactions appeals to users. But its rise in prominence has been marred by several rug pulls since its inception.
People expect rug pulls to happen on Ethereum due to its decentralized status. But because anyone can launch a token on BSC, the same problem remains.
The biggest BSC rug pull to date was MeerKat Finance, in which $14 million BUSD and 73.6k BNB, totaling approximately $30 million, went missing in early March. The project claims it lost the funds through a hack.