SafeMoon Protocol provides an efficient means of providing decentralized investment instruments that can help long-term holders earn up to 80% annually.
SafeMoon Protocol and other decentralized lending and yield aggregating platforms such as Compound, Maker, and Yearn Finance have been touted by several finance experts as alternatives to savings and investment accounts.
The most important question you have to ask yourself, despite the numerous opportunities the SafeMoon Protocol continues to add to the lives of the underbanked and unbanked is, what gives any type of currency value?
After Bitcoin (BTC) and other altcoins such as Litecoin (LTC), Binance Coin (BNB), and Ethereum (ETH) reached new all-time highs in February, Safemoon joined the ranks of some of the highly used cryptocurrencies that has served users of the decentralized finance world.
After BTC crossed $30,000, $40,000, $50,000, and $60,000 for the first time, several financial bodies across China, Turkey, India, the United States, and the United Kingdom began to question the threat of cryptocurrencies to mainstream fiat currencies.
More importantly, these countries were worried about the millions of citizens that have fallen to crypto-related scams. Collectively, hackers and cybercriminals have taken off with more than $500 million.
This is the primary reason why Trading Education has taken it upon us to explore the potential price of SAFEMOON in the future in the event decentralized finance becomes a mainstay in our daily activities.
SAFEMOON and other DeFi tokens such as Uniswap (UNI), Compound (COMP), PancakeSwap (CAKE), Maker (MKR), and Yearn Finance (YFI) are seen as assets that could bring more gains in the long term than some mainstream cryptocurrencies.
This has given birth to the question, what gives any type of currency value whether digital or fiat?
Key Takeaways
- All forms of currencies have value because they play important roles in the attributes of a store of value and medium of exchange.
- Currencies can be considered as successful if they possess these characteristics (utility, scarcity, transportability, durability, counterfeitability, and divisibility).
- Safemoon continues to see success in trading and value because it meets all the six (6) attributes of successful currencies. So far, the only pitfall that Trading Education could identify is its status as a unit of exchange. This is because digital currencies are seen as a threat to the current economic system and therefore have not been granted mass acceptance as a legal tender.
- The attributes of transferability and utility are mostly challenged due to the difficulties of storing digital currencies as well as the complexities of using cryptocurrency exchanges.
- However, if the SafeMoon Protocol expands its ecosystem with the launch of the non-fungible token (NFT) exchange, charity projects, and crypto educational application, its cryptocurrency can capture a significant part of the market in the case there is a price spike. This is because as of Saturday, 6th November 2021, there are more than 570 trillion SAFEMOON Coins with more than 420 trillion SAFEMOON Coins burned. If SAFEMOON tests $1 in the future, there is a huge possibility that its market value could be in the trillions.
Why Currencies Have Value
The usability of any currency (fiat or crypto) can be held in high esteem if it serves the primary function of a store of value.
In other words, a currency can be categorized as valuable if it can maintain its relative value over a long period without being susceptible to depreciation.
Throughout the history of the world, particularly in the civilization era, precious metals such as gold and silver, and commodities such as grains and livestock were used as payment methods. They were seen as such because of their relatively stable value.
As society evolved, people decided to find new and improved ways of going about daily transactions. This was because, without manpower, it was practically impossible to carry loads of grains (wheat, soybeans, rice, oats, and corn), and livestock (goat, sheep, and cattle) from one geographical area to another. To put it simply, society shifted from using these payment methods to finding an alternative in the form of minted currencies.
Several societies that saw the success of the use of minted currencies began shifting from the grains and livestock since the new currency could be used as a store of value (long shelf life) as well as a medium of exchange. The properties of metals reduced their chance of depreciation to the barest minimum.
With the advancement of technology in the last two hundred years came the innovation of steel and plastic. This made it possible for printers to be made.
Once printers could print several forms of paper, paper money became a mainstay in the developed world, particularly, the United States and the United Kingdom.
Although it did not have the intrinsic value of minted coins, it was very light and possessed the feature of transportability in several quantities at a time.
With the introduction of the financial markets in the 1900s and the introduction of supercomputers, various forms of digital currencies and payment methods were introduced into the global world.
Paper Money became representative money. This means that each note can be exchanged for a specific amount of commodity such as grains because it represents something of value. Unfortunately, paper money has no value of its own.
China was the first country to introduce government-issued fiat money banknotes in the 11th century.
The adoption of banknotes by several countries worldwide came in 1971 when President Nixon decided to decouple the United States Dollar from gold.
This was the beginning of banknotes gaining the popularized term fiat currency.
Fiat currencies such as the Great Britain Pound (£), Euro (€), United States Dollar ($), Japanese Yen (¥), Chinese Yuan (CNY), South African Rand, Canadian and Australian Dollars, among others are issued by independent central banks of the countries that use them. Unlike metals and commodities that had a value of their own which was agreed by the two exchanging parties, the value of fiat currencies is agreed upon based on the faith citizens of several countries have in them as a medium of paying for goods and services.
In the 21st century, although the United States Dollar, Euro, and Great Britain Pound continue to dominate the market, every country on the face of the earth at one point had a sovereign national currency.
Throughout studies conducted over time, despite the threat of inflation in the long term, many well-established economies believe the least form of money that is least likely to depreciate to worthless zones is fiat currency.
The durability (store of value) and utility (accepted form of medium of exchange) characteristics were the primary theses on which the aforementioned conclusion was drawn.
Scarcity, Divisibility, Utility, and Transferability
The most successful currencies have the following attributes (utility, scarcity, counterfeitability, transportability, durability, and divisibility). Let us analyze these attributes individually.
1. Divisibility
Successful currencies are divisible.
To put it simply, it should be able to be divided into smaller incremental units.
The price of a Samsung phone will have different prices on different markets since the currencies used are different.
Therefore, for a currency to get certified as an efficient medium of exchange across different geographical areas, it must be flexible enough for divisibility to take place.
To help you understand, Satoshi Nakamoto made the first cryptocurrency Bitcoin divisible.
In fact, Bitcoin can be divided into 8 decimal points. Therefore, suppose BTC trades for $60,000 and you are unable to buy a full BTC, you can purchase a fraction of the coin.
Suppose you buy $12,000 worth of the digital gold, you would receive 0.20000000 BTC.
In this case, should the price of BTC drop to $30,000 and you are still unable to purchase a full coin due to your having a capital of $24,000, you can still buy a fraction and have a whole coin.
With an investment capital of $24,000, you can buy 0.80000000 BTC.
Because of the attribute of divisibility, you will end up having a full BTC since the 0.20000000 coins purchased earlier + the 0.80000000 purchased later equals 1 Bitcoin (BTC).
Since you now understand divisibility under the complex lens of cryptocurrencies, let us also consider divisibility under the simple lens of fiat currencies.
You can swap $50, £50, or €50 notes for two $20 notes plus one $10 note, two £20 notes plus one £10, and two €20 notes plus one €10. The end value of the transaction will remain the same.
2. Counterfeitability
For any currency to have unwavering support in terms of trust, it must prove resistance to duplications.
Once an individual or group of people collectively known as counterfeiters create fake banknotes or coins, regular citizens question the legitimacy of the counterfeited note or coin as a medium of exchange.
A great example can be attributed to the waning faith in the use of the £20 and £50 notes that rocked the United Kingdom in the late 1990s.
Two members of a gang mounted what continues to remain as the largest counterfeiting operating ever to be discovered in Britain worth £50 million.
When details of the news were broken to the general public through television, radio, and newspapers, many citizens became a bit reserved with regards to using the £20 and £50 to purchase goods and services.
Once there is an infiltration of a very smooth financial system, counterfeitability also increases the costs of goods since there is too much money in the system.
This is the primary reason why the attribute of counterfeitability is prioritized when it comes to the definition of successful currencies.
3. Transportability
The primary reason why commodities were dropped for the use of other forms of money in the form of currencies was because of the human labor involved in moving goods from one place to the other.
Therefore, for a currency to become a household item that is trusted by billions, it should be easily moved between people.
In the modern definition of transportability, aside from moving around physically and internally, the currency must be able to move through nations (in what is called a cross-border transfer) through exchanges and other forms of financial technology.
4. Utility
The basic definition of utility is functional rather than attractive. Others define utility as being useful and able to perform several functions.
In addition to this, utility is described as the state of being beneficial, profitable, or useful.
Successful currencies are extremely useful to the population it serves due to their acceptance across the board.
As a result, if a currency can help in the trading of several units of goods and services, its utility can never be called to question.
The importance of currency utility has been invaluable to the modern population since it has helped ameliorate consistent barter trade through the direct exchange of goods.
In many ways, utility is directly correlated with transportability. Since the currency needs to be used multiple times in a given period, its ability to be moved across different regions easily and quickly confers success on it.
Although precious metals and commodities had utility on their side, they were not easily moved around several places and this is the primary reason why currency money was created to replace them.
5. Durability
Why is it that several brands of mobile phones can be found online but many people prefer iPhone, Samsung, and Nokia to other brands?
This is due to the rave reviews that continue to trend online about the user interface, ease of use, and more importantly, the durability of such smartphones.
This is why these companies sell more smartphones and other mobile devices and as well record relatively high returns on investments (ROI).
When it comes to currency money, the aforementioned case study is the same.
If a currency can easily be destroyed, mutilated, or damaged due to it not being made with specific ratios of substrates composed of cotton fiber and linen, it will become unusable after a period.
This is the reason why durability must be upheld by users of the currency money so that it can continue to remain in circulation.
6. Scarcity
Scarcity is the state of something in short supply.
According to the National Geographic Society, “Scarcity occurs when the demand for a good or service is greater than the availability of the good or service.”
There are three forms of scarcity and they are demand-induced, supply-induced, and structural.
Since currency cannot be produced by different organizations but the central government of a country, the level of SUPPLY of a particular currency is the sole determinant of its value.
Therefore, if there is too much money in the system, prices of goods tend to go up.
In most cases, an economic system is either challenged or collapses.
In the case of the United Kingdom, the printing, distribution, and circulation of the £20 and £50 notes brought challenges to the financial system of the countries that use pounds. People questioned the validity and authenticity of the notes they were holding.
In another case such as Robert Mugabe’s time as President of Zimbabwe where several notes such as 100,000 and 500,000 Zimbabwean dollars were printed, this led to inflation as well as hyperinflation.
At the time millions of Zimbabwean dollars could purchase relatively few goods.
In addition to this, you had to exchange millions to get 100s of pounds and dollars, meaning the system collapsed.
As a novice trader or investor who wants to know how currency gets its value, you should know that in addition to the economic repercussions of the more supply of money, having less money in a system can also cause great problems.
The concept of monetarism came into being to foster economic stability by targeting the growth rate of the money supply.
One of the ways of controlling scarcity by several central governments worldwide is the constant printing of fiat currencies. Whiles developing countries in the Middle East, Sub-Saharan Africa, Asia, Central, and South American do not have a preset amount of inflation, developed economies have a preset amount of inflation.
Without a preset amount of inflation, developing economy-backed currencies are always in free fall on exchanges when traded alongside developed economy-backed currencies.
This is different from SAFEMOON which boasts a more flexible issuance rate that changes periodically due to the number of coins being bought out of the maximum supply and added to the ones already existent in circulation.
SAFEMOON Compared Against Fiat Currencies
1. Counterfeitability
Fiat currencies over the years due to economic problems have seen several notes counterfeited.
Aside from the example of the United Kingdom, Canada faced counterfeiting problems with its 100 dollar bill which was replicated perfectly by a group of young individuals wanting huge spending power.
Fortunately, the same cannot be said for SAFEMOON and cryptocurrencies in general.
This can be attributed to the complication of blockchain technology and in the case of the SafeMoon Protocol, the security measures in place by the Binance Smart Chain.
This has not stopped hackers and cybercriminals from trying though. Thousands of such individuals have made attempts to double spend. Unfortunately, in trying to counterfeit transactions, blockchain technologies are structured in a way where more than 51% of a network’s power must be gained before any form of unscrupulous activity can take place.
When you consider the fact that the Binance Smart Chain relies on a proof-of-stake (POS) network to process more transactions, it is impossible for counterfeiting or any form of cyber-attacks to affect tokens of the chain.
This is because in proof-of-stake (POS) millions of people contribute to the validation and verification of blocks and transactions through Graphics Processing Units (GPU) and Central Processing Units (CPUs) of personal computers.
When the risks of trying to infiltrate blockchain technologies are compared to rewards, shadow individuals and organizations realize it is not cost-effective. As a result, they forget about it and find other ways of making money online.
Check Out: Best Methods On How To Earn Safemoon Coins Fast
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
2. Durability
When it comes to durability, fiat currencies and cryptocurrencies, in general, operate on different wavelengths. This is because fiat money comes in the form of banknotes and coins which are physical to the naked eye.
On the other hand, Safemoon and other digital tokens come in the form of digital coins which can only be seen on a screen.
Therefore, fiat money such as the United States Dollar (USD) or Great Britain Pound (GBP) in the event of a storm, fire outbreak, or extensive usage can be torn (being wet), burned (fire), and destroyed (weakness from being held by too many people). SAFEMOON and crypto tokens are extremely valuable because it is not susceptible to storms that could see them torn, burned, or destroyed in a way that affects the holder of the currency.
With that said, Safemoon and cryptocurrencies are burned and destroyed but in a positive way.
When you use Safemoon as a DeFi token, three (3) things happen. They are Reflection, Liquidity Provider acquisition, and Burn.
To reduce the number of SAFEMOONs in circulation, the developers of the SafeMoon Protocol engage in Manual Burning.
This is a complex process that sends Safemoon tokens to an address that cannot be retrieved.
In such a scenario which is popularly termed TOKEN BURNING across crypto circles, some SAFEMOONs are destroyed.
The resultant effect of this can be found in an increase in the price of SAFEMOONs since a decrease in supply always leads to a price spike in assets.
This is the primary reason why as of Sunday, 7th November 2021, there are more than 420 trillion SAFEMOON coins burned.
This does not mean that your Safemoon coins cannot take a negative hit. Although they are durable, you cannot store them in your pocket or physical wallet like fiat money.
You can store them on wallets that support Safemoon such as TrustWallet, MetaMask, Trezor, and Free Wallet.
On those platforms, you will have access to your account as well as SAFEMOON holdings.
Therefore, aside from setting up the usual password, we are all accustomed to through signing up for accounts on social media platforms, you are given a minimum of 12 words and a maximum of 24 words called private keys or passcodes.
Trading Education Caution: Hold onto these codes with your life. Although the SAFEMOON coins you hold will always be available in the records of the SafeMoon Protocol, losing these keys will lock your wallet forever.
3. Transportability
With the advancement of the world, transporting money from a geographical area to another has become very easy.
Buoyed by Swift Technology as well as On-Demand Liquidity (ODL), it has become easy for fiat currency to move between countries within hours and days – something which used to take weeks to a month.
Another factor that has made this possible is automated clearing houses (ACH) which see transactions from the United Kingdom and the United States arrive at remote countries within 1 to 2 business days.
This attribute of transportability has transcended into digital currencies.
On crypto wallets that support Safemoon, the tokens can be easily transferred between several parties within a short period. Thousands of transactions involving Safemoon are processed no matter their size.
Since Safemoon has the transportability or transferability attribute, we can term it as a successful currency.
In answering the question, do we have physical Safemoon coins, as of 7th November 2021; there are no physical representations of the cryptocurrency.
4. Utility
Every currency needs to have extensive usage to confer value on it. Due to the impact blockchain technology and more essentially decentralized finance have on the unbanked and underbanked, several people continue to use Safemoon and other DeFi tokens in decentralized and trustless networks.
Due to the aim of decentralized finance, users do not have to establish any forms of trust among one another before the SafeMoon Protocol can work.
This is why millions of developers and tech entrepreneurs including John Karony patronize the smart contract-backed blockchain of Binance. He wanted to take advantage of the extensive usage of innovative products such as smart contracts.
Today, the SafeMoon ecosystem boasts of a protocol that allows people to hold the Safemoon token for the long term and earn approximately 80% of the holdings in a trustless and permissionless manner.
What’s more, the utility of Safemoon is going to soar significantly when the non-fungible token exchange, Coin LaunchPad, and other products are launched.
Since SAFEMOON is the native asset of the ecosystem, it would play an extensive role in settling transactions on all products involved in the SafeMoon Protocol.
5. Divisibility
Ordinarily, having 1 quadrillion tokens of any form of currency on the market is vastly large.
Therefore, the maximum cap of Safemoon is relatively high in comparison to other cryptocurrencies as well as fiat currencies.
Fortunately, like all currencies, Safemoon has the attribute of divisibility.
This makes it possible for you to buy fractions of the token in the event if should reach the price levels of parent crypto Bitcoin (BTC), silver token Litecoin (LTC), novel token behind the first smart contracts network Ethereum (ETH), and the native asset of the Chain the SafeMoon Protocol thrives on, Binance Coin (BNB) someday.
In such a case of fractions of SAFEMOON being bought, there will be several units of SAFEMOON in the market.
In comparison to fiat currencies, cryptocurrencies are more divisible than the United States Dollar, Euro, Great Britain Pound, Japanese Yen, and Chinese Yuan among others.
It must be noted that divisibility is also correlated to scarcity and how tokens can be available in supply.
In the event, SAFEMOON crosses several milestones and reaches new high highs, holders of small amounts of the token can still use it to go about their financial activities.
To give you an example of divisibility, fiat currencies can be divided into 2 decimal points (1.00).
On the other hand, SAFEMOON and other tokens can be divided into 8 decimal points (1.00000000).
6. Scarcity
When the SafeMoon Protocol was launched in March 2021, its whitepaper revealed that the total supply of SAFEMOONs would be capped at 1,000,000,000,000,000 (1 quadrillion).
To break down the technicalities and mathematics, the current supply of Safemoon at the time of writing is around 570 trillion coins.
According to the white paper, “The SafeMoon Protocol will gain value over time thanks to its coin-burning strategy, making it a deflationary digital currency.”
Using simple mathematics, if the number of burned SAFEMOONs 428 trillion is added to the ones in circulation, it means that are 998 trillion coins taken off the maximum supply.
This means that practically, there are left with 2 trillion SAFEMOONs that could be purchased by traders and investors.
If individual crypto whales and institutional investors decide to invest in SAFEMOONs, it would become one of the fastest projects that had all of its tokens purchased within a short period.
Using the basic laws of supply and demand, we all know the effect of what this means.
With that said, the SAFEMOONs supply approach is different from fiat currencies.
The global fiat money supply is categorized under M0 (currency in circulation), M1 (demand deposits such as checking accounts in addition to currency in circulation), M2 (small-time deposits, savings accounts, plus demand deposits), and M3 (constitutes money market funds in addition to large-time deposits).
The four (4) can be categorized under two groups (store of value and medium of exchange).
M0 and M1 deal with money in circulation which is seen as a medium of exchange.
M2 and M3 deal with deposits that are locked up for interests in the form of a store of value.
As part of stringent monetary policies, governments maintain the flow of money through stringent economic factors. The same cannot be said for SAFEMOON.
Presently, with millions of unsophisticated traders and investors pouring billions of dollars into a trillion-dollar crypto economy, it would be sooner rather than later that all SAFEMOONs will be purchased off the total supply.
Since BTC and LTC have not reached a point of scarcity, no one knows the extensive effects of what scarce SAFEMOON tokens will do to its price.
With our basic knowledge in the purchase of goods with limited supply, there is a chance that Safemoon will reach new price milestones such as $1 and beyond.
Safemoon Challenges
When you compare Safemoon to fiat currencies, the cryptocurrency ticks all the above categories of what makes a currency successful.
Since no currency is perfect, Safemoon, like fiat currencies, faces several challenges.
These are briefly explained below.
Store of Value ─ An asset such as gold can be used as a store of value because it has intrinsic value. Unfortunately, Safemoon does not have any value of its own. Its market value increases when there is substantial demand for the token and decreases when investors decide against investing in SAFEMOON. The cryptocurrency market will continue to enjoy several bullish days. This does not mean Safemoon will continue soaring for the rest of its days. Whatever happens, extreme bearishness could engulf the market which can render it worthless in the long term. This could bring long-term investors huge losses.
Uncertainty of the Cryptocurrency Market ─ The market has done well in creating passive income for millions of people. With that said, no single analyst or expert knows what is in store for the decentralized finance market in the future. China, India, and Turkey have led the way in cracking down on the market. Time will tell if other countries will follow suit. Should a relatively wide crackdown ensue in the future, no one knows the fate of Safemoon and cryptocurrencies in general.
Problems Associated with Cryptocurrency Exchanges and Wallets ─ Exchanges that support Safemoon could be hacked. Aside from that, private keys (passcodes) of the wallet that hold your tokens could also be lost which could deny you a chance of accessing your SAFEMOON coins forever.
Trading Education Advice: Invest in Safemoon with an open mind. More importantly, if the risk of investing in Safemoon is smaller than the rewards, you can go on and risk what you can afford to lose.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Safemoon Worth Versus Rival Fiat Currencies
To calculate the value of Safemoon, we need to project the potential price of Safemoon based on what its ecosystem can offer the decentralized finance space.
The worth of store of value and medium of exchange can be used to measure the worth of fiat currencies.
Let us take a look at the worth of SAFEMOON versus fiat currencies.
According to the Federal Reserve Bank of St. Louis, M1, currency in circulation and demand deposits is valued at about $4.9 trillion.
This value is a representation of the cumulative sum of the mediums of exchange globally.
Money markets and large deposits (M3) are valued at $20.7 trillion. Gold also functions as a store of value.
As of Sunday, 7th November 2021, the market capitalization of Gold stands at $11.56 trillion.
Overall, the total valuation of M3 (20,797,000,000,000) plus (+) gold (11,560,000,000,000) equals $32,357,000,000,000 ($32.3 trillion).
Trading Education’s estimate for the global medium of exchange and store of value comes to a valuation of $37,200,000,000,000 ($37.2 trillion).
If Safemoon increases to test a new all-time high of $0.50 someday, the total supply of SAFEMOON (1 quadrillion coins) multiplied by 0.50 would take the market capitalization of Safemoon to $500,000,000,000,000 ($500 trillion).
Read Also: SafeMoon Price Predictions
Difficulties Of Valuing Safemoon
The real worth of Safemoon can only be valued with a long-term outlook. Perhaps, what we should factor into account is, how much adoption would the SafeMoon Protocol achieve in the space?
For us to value Safemoon, we must look at several risk factors that can slow its adoption such as an infinite competition from more than 13,000 crypto projects.
Aside from that, we must assess competition from other decentralized applications (DAPPS) that continue to garner great daily usage rates.
On the other hand, the SafeMoon Protocol has a roadmap that could see it mount a strong challenge that could see its native asset Safemoon move from being classified as a medium-cap digital asset to a large-cap digital asset.
While Safemoon continues to remain speculative, the launch of several projects could see extensive usage of the token on the SafeMoon ecosystem.
If Safemoon continues to perform well in the market, there is a huge chance that the project can reach the market capitalization of Solana (SOL), Ethereum (ETH), Bitcoin (BTC), and even Gold, considering the number of tokens on the market.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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