What is SafeMoon (SFM)? Your ultimate guide

SafeMoon is one of the hottest cryptos to launch over the past year, but are there any risks?

A man sitting in front of a computer screen showing a trading chart while holding a smartphone displaying the SafeMoon logo                                 
SafeMoon has a controversial way of working – Photo: Shutterstock
                                

Contents

SafeMoon is a cryptocurrency that has garnered a devoted user base since its launch in 2021. The token has already gone through a couple of versions as it aims to create a safe and secure cryptocurrency which is protected against market volatility. So what is SafeMoon (SFM)? How does SafeMoon work? What is SafeMoon used for?  

How SafeMoon works

SafeMoon first came onto the market in March 2021. The idea behind SafeMoon was to encourage people to hold on to their tokens and watch the value of their investment grow (at least theoretically). If people decide to sell their SafeMoon tokens, they are subject to a 10% sales tax. Initially half of this tax was distributed among token holders, while the rest was burned. Now, though, 40% of the taxed money is redistributed, 30% is given to the liquidity pool, 20% is burned and 10% is sent to a growth fund. 

The way in which transactions are taxed and money is redistributed means that, at least in theory, someone could see the amount of SafeMoon cryptocurrency they hold grow without having to actually buy any. Furthermore, you could also make a profit from just hanging onto your token while the overall price went down. If more and more people sold, and you did not, you would soon, at least theoretically, stand to make a considerable profit.

SafeMoon was launched in early 2021, and it operates on the Binance Smart Chain. This means that, technically speaking, it is a crypto token, rather than a coin, although you will hear the two terms used interchangeably. Its name combines the elements of a popular call to arms among online crypto communities, “to the moon”, with a reference to its apparent safety and security. The coin was founded by John Karony, a former analyst with the United States Department of Defense. The idea is that it serves as a store of value that resists volatility in the market by encouraging people to hold onto it. 

Some concerns

There are, however, some concerns about the SFM coin and its tokenomics. Some worry that, because the cryptocurrency rewards people who have held it for a longer period of time, that it is a ponzi scheme, or at least very similar to one. The token was subject to an audit by CertiK in April 2021, which found that there were 12 issues with SafeMoon, most notably that of a major issue relating to centralised risk in the addLiquidity function.

The audit found that, given enough time, an owner address could accumulate a large number of tokens which, should that address be externally owned, could lead to “devastating consequences”. The auditor suggested that the function be replaced by a smart contract, which would help lock the liquidity pool. 

There is a concern that since Karony holds around half of the liquidity, it is entirely possible that he could sell or burn it, therefore making the coin effectively worthless. Karony claims that the liquidity pool will only be used for emergencies, and that the funds could end up seeding exchanges that trade SafeMoon or fund future products. 

The SafeMoon logo on a cartoon image of space rocket
Can SafeMoon really get to the moon, or will it crash and burn? – Photo: Shutterstock

A new era?

The SafeMoon cryptocurrency has had, for a token that is less than a year old, quite a chequered history. SafeMoon, like many other meme coins, exists in fractions of a cent. While this is commonplace among cryptos, there was some concern that the very low price of the token may have put people off.

This problem was addressed when the SafeMoon V2 upgrade came into circulation in December 2021. One of the biggest features that V2 had was the consolidation of the old SAFEMOON coins into new SFM ones. The ratio was 1000:1, with SAFEMOON holders able to change to the new SFM coin without being put out of pocket. As of 21 February 2022, there was a self-reported SFM circulation of 575 billion out of a total supply of 1 trillion. 

While support for the old SAFEMOON has been withdrawn, the token still exists on exchanges, meaning that the two coins can co-exist on certain exchanges. It is important to be sure which of the two tokens you want to purchase. Part of the reason why there are two separate SafeMoons is because the process of converting SAFEMOON to SFM was not an automatic one, meaning holders could, if they wanted, keep the old version of the crypto. 

SafeMoon has plans to expand, saying that it aims to set up its own crypto exchange at some point in the future. Coupled with this is “Operation Phoenix”, which includes a programme that should see SafeMoon fund what it describes as a new, more efficient, kind of wind turbine, which the organisation plans to use in Africa. Other parts of the project include an application for an EU e-money licence; a SafeMoon payment card; a crypto exchange; and a Web3 network.

Legal worries

Professional boxer and social media personality Jake Paul
Jake Paul endorsed SafeMoon and now he has been named in a lawsuit – Photo: Shutterstock

There is also the news that on 17 February 2022 a class action lawsuit against SafeMoon was filed in California. The case argued that SafeMoon “lured” people into investing in the token by taking part in “misleading promotions”. It accused the then-SafeMoon COO, Jack Haines-Davies, of recruiting celebrities and paying them to endorse the crypto, thus inflating its price. It also argued that a stalled attempt to launch a SafeMoon cryptowallet led to the price falling.

The lawsuit names Haines-Davies and Karony, as well as former CTO Hank Wyatt, SafeMoon’s global head of products, Ryan Arriaga, and former company representative Shaun Witriol, as well as celebrity endorsers YouTuber Jake Paul, Backstreet Boy Nick Carter, YouTuber Ben Phillips and rappers Soulja Boy and Lil Yachty. It is worth noting that Karony took to the SafeMoon discord channel, telling people there that he was not worried about the news, saying: “If there was a concern, SafeMoon’s brilliant legal team would have notified me of any concerns. They have not.”

Final thoughts

Although SafeMoon is getting increasingly popular, the token is still relatively young. While 2021 was a big year for crypto, SafeMoon was one of the new cryptos that got a lot of attention, due in part to a swathe of celebrity endorsements. These are at the heart of the recently filed lawsuit.

Whether the lawsuit will be successful remains to be seen, but SafeMoon V2, as of 21 February, was worth around $0.0014, which was less than it was worth around the time the upgrade happened. For comparison, it opened 16 December 2021 at $0.001639, meaning that it has lost around 14% of its overall value in the course of just over two months.

While some peaks and troughs are only natural for a commodity, this could be worrying, especially when, compared with the all-time high of $0.007232, which it hit on 4 January 2022, the current price represents a dip of around 80% in a little over six weeks. This could well prove an issue for potential investors.

There is also the possibility of the coin being subject to a rugpull. While Karony, who also serves as SafeMoon CEO, has said that he intends to stick with the cryptocurrency, the unusual way in which it works could well be cause for concern. As always with cryptocurrency, it pays to be careful.

FAQs

SafeMoon was created by John Karony, who serves as its CEO. At present, Karony is supported by the likes of VP of operations Charles Karony, global head of products Ryan Arriaga, director of content David B. Smith and Mooncraft lead Jacob Engel.

This depends on what you mean. SafeMoon is owned by both investors and the SafeMoon organisation. 

It certainly says that it is. However, some concerns were brought up in last year’s audit. Also, cryptocurrencies are very volatile, so you do risk losing money, no matter what you invest in. You will need to do your own research, never invest more money than you can afford to lose, and remember prices can go down as well as up.

If you are operating in a jurisdiction where cryptocurrency is legal, then it will be legal to buy, sell, hold and trade SafeMoon. However, there are some concerns about the way in which the company behind the token has operated, as seen in the recently-filed lawsuit. 

Something that makes SafeMoon different is that it rewards people for holding onto the coin, rather than just selling it. How profitable holding SFM is will depend on how the market is doing, however.

Further reading

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