Holding coins equals mining? Market value surpasses $5 billion in two months, analyzing the investment logic behind SafeMoon.

How did SafeMoon achieve an astonishing $5 billion circulating market value in just 50 days?

(This article is authorized to be reprinted from ChainNews, titled "Continue Capital: Analyzing the Investment Logic Behind the Multi-Billion Dollar SafeMoon," written by Pima, Co-Founder of Continue Capital. Original article here)

It all started with the SafeMoon, the "Dog King" across the three realms (ETH/BSC/HECO), which turned 0.2 ETH into $67 million in just 55 days, and this wasn't just a one-time occurrence, leaving people frustrated: what happened to the promised spring of value investment?

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Getting back on track, amidst the recent surge from Doge, Shiba, and SafeMoon, anxiety arose as mainstream currencies experienced a pullback. However, joking aside, we still need to unravel the investment context behind it. I must clarify beforehand that I do not hold any of the aforementioned tokens, nor do they particularly match my personal investment framework. Nonetheless, this does not hinder us from retrospectively analyzing in an attempt to find some underlying investment logic for future reference. This is the core purpose of this article.

A great bull market is a grand tale of emptying heights, with countless memories of lamenting over missed opportunities. If some basic logic cannot be grasped, we will still return to the three unchanging quandaries: would you dare to buy into a project, would you dare to go all-in, and can you hold on during a downturn? I can confidently say that even if given another chance, it's still uncertain and hard to hold on.

Regarding Doge, it can mainly be attributed to one factor: the influx of new off-exchange participants. Whether it's Elon Musk's strong endorsements or community-driven promotions, the core is bringing in a wave of newcomers, and these projects are generally low-priced. Why does the late stage of every bull market witness a surge of low-priced tokens? As the market progresses, more retail newcomers enter. If you've participated in other investment markets like stocks, you'll realize that the market conditions determine the trend. Retail investors lack fundamental knowledge and investment common sense, and they are only attracted by one goal: getting rich quick.

High prices intimidate the average person. Stocks have high prices, and in China, each market cycle witnesses slogans of eliminating stocks priced at 3 RMB or 5 RMB. Those who buy higher-priced assets generally understand what they are buying, why they are buying, when it's a reasonable valuation, and when there might be a bubble. Those who can afford to buy Maotai liquor have a certain threshold of wealth and knowledge. However, retail investors are different. Some may not even know what they're buying. Therefore, quality stocks tend to have higher prices. Bulls focus on momentum, bears focus on quality. BTC/ETH drop less during bear markets. Newcomers' funds + low prices are key. These are some of our views on why newcomers buy Doge.

Secondly, why do they enter the cryptocurrency field? If WSB represents the democratization of investment challenging Wall Street, then the cryptocurrency realm is the kingdom of marginalized retail investors on the internet. The rise of the WallStreetBets community provides retail investors with a platform, similar to the early BitcoinTalk and Reddit forums in the crypto space. Decentralization, community-driven, open-source inclusivity naturally attract those with dreams of wealth. This also reflects the deep-seated anxieties of the new generation. As society stabilizes, class structures solidify, making it harder for ordinary people to rise. New generations face increased difficulties in accumulating wealth, and newbies in the investment market tend to overestimate their skills. Retail investors are willing to take on more risks to hedge against unfavorable circumstances.

YOLO means "You Only Live Once, so take bold actions." This world rewards innovation and risk-taking. Regardless of your wealth status, allocate a certain percentage, like 1%/5%, divided into ten parts, for high-risk investments. Ensure your fundamental portfolio is solid. In the crypto space, BTC/ETH are the basics. Only when these assets generate profits can you have the capacity and mindset to explore new projects, experiment with new technologies. "With ample food and clothing, one knows the rites and music." Maintaining a positive and stable mindset is a core element of investing.

Thus, a bottom-up community has gathered a large number of retail investors. The rise of DAO organizations, the explosion of open-source environments like GitHub, greatly unleash personal freedom and innovation. The difficulty in accumulating wealth for the new generation has driven the surge in retail investments. The rise of convenient infrastructure like Robinhood/Coinbase App/Cash App makes it increasingly simple for the average user to participate in the market, hence the continuous rise in cryptocurrency adoption.

The development of penetration rates can be referenced through the "Innovation-Adoption Curve" theory (a classic theory proposed by American scholar Everett Rogers in the 1960s about persuading people to accept new ideas, concepts, and products through media). If there are currently 100 million people participating in cryptocurrencies, following the adoption rate of internet users, achieving a penetration of one billion people in the cryptocurrency space within a decade is entirely possible.

Before delving into SafeMoon, let's first discuss the BSC ecosystem.

The investment ceiling lies in people and the market. How many users can your product serve, and how much value can you create for them, determines the value of your product. Ultimately, investment aims to calculate a company's final value through discounted cash flows, factoring in the company's service population, market size, growth rate, gross profit, capital expenditure, and discounting cash flows over time, along with a potential growth rate to calculate the company's final value.

If you can serve a million people, you have a corresponding valuation for a million people. If you can serve a hundred million people, you have a valuation for a hundred million people. Our long-term vision is to have the cryptocurrency space serve a billion people globally. Just like the project Pi.Network we led, with a solid user base of millions, somehow it completely changed when it entered the domestic market, completely ignoring other values.

I have also shared internally how to view BSC and other ecosystems. Every city in China has Industrial and Commercial Bank of China, but there are also many city commercial banks like Ningbo Bank and Foshan Bank in third and fourth-tier cities. It's not that first-tier city residents have trading and lending needs while fourth and fifth-tier city residents do not; they also have these needs, just with a time gap in the market. Projects like Cake/Xvs represent satisfying new Binance users' DeFi needs. Demand has risen, but what about supply? It's about the development environment. We see why Binance launched Binance Chain but the BSC, a Binance Smart Chain fork from ETH, skyrocketed. This is precisely because BSC perfectly replicates ETH's development environment. Once developers are familiar with a set of development tools, they are unlikely to easily learn new skills. BSC instantly attracted millions of users and the development ecosystem gradually expanded.

Basic user needs are met, which is the specific value these projects possess. But why do these fork projects generally have lower PEs? You are not original, so the market discounts your creativity. If you engage in minor innovations every day, patching things up, lacking industry insight, lacking deep technical exploration, what you do may be transparent even to non-professional users. There will be no surprising products, no amazing creativity, and without creativity, there is no efficiency, losing the expectation of high growth, naturally leading to lower market valuations.

Do people care about these things? Do people value investing? Growth comes at a cost. When you suffer painful losses, you also grow. Whether you care or not, there will always be a small wave of survivors from the previous round who care. This is why any investment market is destined to gradually professionalize and institutionalize. Why is it so hard to make money in the stock market? Why is internet entrepreneurship so insular? Because the dividend period has passed, our industry's penetration rate is not high enough, at least there is still the growth dividend. The crypto space will also gradually solidify, and extreme surges and drops eliminate retail investors. I hope you all can find your position in the future.

Lastly, the crown jewel of the Binance ecosystem, the Dog King across the three realms, SafeMoon (a reminder, do not think this is an invitation for you to participate). Below is an internal technical analysis, providing a glimpse of what's happening.

In the past week, Doge's popularity soared under the influence of the richest person, reaching new highs. Simultaneously, communities worldwide began searching for the next Doge: the new project SafeMoon quickly caught people's attention with its "reward holders, punish sellers" slogan and took off.

As of this article, SafeMoon's data is as follows:

• $8.5 billion total market value, with 40.6% of tokens burned, making the circulating market value $5.05 billion
• 795,330 addresses
• Over 2 million transactions
• Online for 54 days and 9 hours

How did SafeMoon achieve an astonishing $5 billion circulating market value in just 50 days?

Setting aside all market and human factors, let's conduct a simple analysis at the smart contract technology level. Given that SafeMoon's smart contract is a complete copy-paste of another project PIG, let's proceed with a brief analysis using PIG's contract code.

Currently, thousands of new tokens are added daily on the BSC chain, with at least 50% being PIG-type contracts. Among the tokens with circulating market values exceeding tens of millions on the BSC chain, over half are PIG-type contracts. Therefore, the contracts of tokens like PIG and SafeMoon are collectively referred to as "PIG contracts." Considered perfect, they are termed perfect Dog contracts due to the following three major characteristics:

Hold and Mine

Each transaction of SafeMoon incurs a 10% fee, with 5% automatically distributed to all token holders.

Regardless of buying or selling, the contract will automatically distribute 5% of the fee to all token holders based on their token holdings, known as "hold and mine." In the case of SafeMoon, with 40% of tokens already burned, 0.05*0.4=2% of the fee will be burned, and the remaining 3% will be distributed as holding rewards to all token holders. Note: Every transaction receives dividends, perfect!

As a new project, SafeMoon owes much of its success to the "hold and mine" mechanism, which incentivizes investors to hold steadily without selling. Rough estimates suggest that annual dividend rewards can reach 50-60% (subject to trading frequency and volume fluctuations).

However, the main reason for SafeMoon's success lies not only in "hold and mine" but also in its second feature, "self-growing liquidity," which is the key to SafeMoon becoming the top dog in the BSC, ETH, and HECO ecosystems.

Self-Growing Liquidity

SafeMoon charges a 10% fee for each transaction, with 5% directly added to the liquidity pool, achieving "self-growing liquidity."

https://BSCscan.com/address/0x8076c74c5e3f5852037f31ff0093eeb8c8add8d3#internaltx

Through this link, you can see each transaction automatically adding to the liquidity pool. Due to Moon's high market value, the liquidity added per transaction has reached an astonishing 3600 BNB.

From the contract, we can see that Moon will add liquidity when the token quantity in the contract address exceeds 500,000,000, by selling 250,000,000 tokens, or 50%, and pairing the proceeds from the sale with the remaining 50% of tokens 1:1 to add to Moon's liquidity pool.

It is well known that new projects often face insufficient liquidity in the early stages. Without investors actively adding liquidity to the pool, relying solely on price increases to drive pool depth is like a drop in the bucket. Therefore, many projects without self-increasing liquidity mechanisms often suffer from severely inadequate pool depth, significantly hindering the project's further development.

As shown in the above chart, Moon's liquidity pool has already reached $230 million. Without the self-increasing liquidity feature, at the current token price, the pool would likely not exceed $40 million without any external liquidity injections, showcasing a vast difference. Moon's current pool depth is truly remarkable, thanks primarily to the perfect self-growing liquidity contract function.

Burn and Deflation

Moon has burned 40% of its tokens. Due to the 5% dividend feature, 2% of the fee is directly burned, leading to continuous burn and deflation for Moon.

In conclusion, the clever design of these three main contract features is the fundamental reason why SafeMoon has become the top dog in the three chains.

On a side note, the reason why Uni's PIG model did not shine as brightly on BSC was due to high gas fees. Uni's low transaction frequency resulted in lower fees, fewer dividends, and less liquidity added, making the contract's power less noticeable. On BSC, with a transaction frequency ten times higher, the advantages of the PIG model were greatly amplified, leading to exponential growth. This also fuels our anticipation for the deployment of L2 Uniswap and the arrival of V3, as the warm-up for these silky projects could be the appetizer for L2 Uniswap.

PIG was the first token on the entire BSC chain to implement such a "perfect dog contract." SafeMoon fully copied and pasted PIG's contract code, yet the newcomer's market value far exceeds that of its predecessor and original creator.

All tokens forking the PIG contract are collectively referred to as the "PIG model."

The "PIG model" likely accounts for 50-60% of new tokens launched daily on the BSC chain.

For tokens on the BSC chain with a circulating market value exceeding $100 million launched within the last 50 days, the "PIG model" likely constitutes over 60%.

For tokens on the BSC chain with a circulating market value exceeding tens of millions of dollars launched within the last 50 days, the "PIG model" likely constitutes 40-50%.

For tokens on the BSC chain with a circulating market value between $10-100 million and launched within the last 50 days, the "PIG model" likely constitutes over 70%.

All active top dogs on the HECO chain currently operate under the "PIG model."

Thus, we have traced the entire context of the Doge/SafeMoon trend. Seeing Moon's data, I am amazed. A towering tree with a market value of billions of dollars has quietly emerged in an unfamiliar corner, underscoring the wealth creation myth of the crypto space. It is also awe-inspiring to see the unpredictable creativity of the crypto space, with numerous new continents awaiting exploration. Every seed sown in this soil has the potential to grow into a vast forest. What you cultivate is an era.