Continue Capital: Analyzing the investment logic behind SafeMoon, a multi-billion-dollar local dog
This article is reproduced from:chain news, Author: Pi Ma, co-founder of Continue Capital, forwarded with authorization.
The matter stems from the Three Realms (ETH/BSC/HECO) earth dog king SafeMoon. In just 55 days, a 0.2ETH has become 67 million US dollars, and there is more than this operation, which makes people incompetent and furious: the agreed value investment What about spring? !
Closer to home, it is true that the recent market has been impacted by Doge, Shiba, and SafeMoon in turn, which coincides with the correction of mainstream currencies. The performance of the ice and fire has made many people anxious, but the ridicule is ridicule, and we still need to sort out the investment context behind it. A statement in advance, I do not hold any of the above-mentioned varieties, nor is it particularly in line with my basic investment framework, but this does not affect our review after the fact, in order to try to find some hidden investment logic from it, as a latitude for future investment For reference, this is the core tenet of this article.
A big bull market is a magnificent history of stepping into the void. I have seen all kinds of memory killing and lamenting of breaking thighs countless times. It will become clear after seeing too many. If some basic logic cannot be grasped, it will still return to Three unchanging problems: Do you dare to buy a project for you, do you dare to take a heavy position after buying it, and can you hold the heavy position callback? I can even say with certainty that if I do it all over again, I will still be uncertain.
Back to Doge, it can basically be attributed to one main reason: the influx of newcomers off the court. Whether it is Elon's strong call for the richest man effect or the community's spontaneous promotion, the core is to bring a large wave of newcomers, and these projects generally have low unit prices. Why is there a large wave of low-unit-price varieties breaking out in the middle and late stages of every bull market? In fact, the later the market goes, the more new retail investors come in. If you have participated in other investment markets such as the stock market, you will find that what kind of soil there is, there will be what kind of market. The soil of retail investors is the fundamentals of newcomers. Lack of investment common sense attracts them with only one purpose: to get rich quickly. The high unit price scares ordinary people. The unit price of US stocks is very high. Every round of A-share market has the slogan of eliminating 3 yuan shares and 5 yuan shares. People who buy high unit prices know what they are buying relatively speaking. , why to buy, when is a reasonable valuation, when there may be a bubble, a person who can afford a first-hand Moutai, at least his capital has a threshold, and his wealth and knowledge have accumulated to a certain extent. But retail investors are different, and some may not even know what they are buying, so the unit price of high-quality stocks is usually relatively high. The bull market focuses on momentum, and the bear market focuses on quality. BTC/ETH falls relatively little during the bear market. Funds for newcomers + low unit price is the core. This is our opinion on why newcomers buy Doge.
The second is why did they come to the cryptocurrency field? If WSB is the sound of retail investment hitting Wall Street, then the currency circle is the land of abundance for marginalized retail investors on the Internet. The rise of the WallStreetBets community has given retail investors a place to invest, just like the early BitcoinTalk and Reddit forums in the currency circle. Decentralization, community-based, open source and inclusive, naturally adapt to a large number of people with dreams of getting rich. At the same time, it reflects the deep introversion of the new generation. The more stable the social development, the more solidified the social class, the smaller the chances for ordinary people to make a leap, the difficulty for the new generation to accumulate wealth increases sharply, and newcomers who have just stepped into the investment market will overestimate their investment level, retail investors are also willing to take on more risk to hedge against the various adverse situations they face. The meaning of YOLO is that you only have one life, please act boldly. This world rewards innovation and adventure. No matter what wealth class you are in, you still have to take out a certain percentage, such as 1%/5%, and divide it into ten equal parts to participate in high-odds investments. Well, just like the basic market in the encryption field is BTC/ETH, only these can make you profit, and you have the spare energy and mood to research new projects and try new technologies. Maintaining a positive and stable mentality is one of the core elements of investment.
Thus, the bottom-up community gathered a large number of retail investors, the rise of the Dao organization, (off-topic, we may have not considered why the corporate system exists for a long, long time, or why the corporate system is the way it is now and not other Ways exist, I’m not very mature in some ideas, so I’ll just mention them) The explosion of open source environments such as Github has greatly released personal freedom and innovation, and the difficulty of wealth accumulation in the new generation has led to the rise of retail investment, plus Robinhood/Coinbase App The rise of convenient infrastructure entrances such as /Cash App has made it easier for ordinary users to participate in the market, so the penetration rate in the cryptocurrency field will continue to increase. For the development of penetration rate, we can refer to the "innovation-diffusion curve" theory, (a classic theory proposed by American scholar Everett Rogers in the 1960s about persuading people to accept new ideas, new things, and new products through the media ) If the current number of people participating in cryptocurrency is 100 million, referring to the development and penetration speed of Internet users, it is entirely possible to complete the cryptocurrency penetration of one billion people in ten years.
Next, before analyzing SafeMoon, let's talk about the BSC ecology.
The ceiling of investment lies in people and the market. How many users your product can serve and how much value you can create for how many users determine the value of your product. The ultimate investment is to discount the free cash flow to calculate the ultimate value of the company. According to the number of people served and the size of the market, set the company's growth rate, gross profit, capital expenditure, etc., then discount the cash flow over time, and add a possible growth rate to calculate the company's final value. If you can serve a million people, you will have a valuation corresponding to one million people. If you can serve 100 million people, you will have a valuation corresponding to 100 million people. (One more thing, our long-term vision is to make the cryptocurrency field serve one billion people around the world) Just like the project Pi. Say nothing about other values.
I have also shared how to view BSC and HECO and other ecology within the company. Almost every city in China has ICBC, but there are still a large number of urban commercial banks such as Ningbo Bank and Foshan Bank in third- and fourth-tier cities. It cannot be said that people in first-tier cities have transactional lending needs, while people in fourth- and fifth-tier cities do not have transactional loans. They still have the demand for DeFi, but there is a certain time gap in the market, so the project represented by Cake/Xvs is to meet the demand of new Binance users for DeFi. If there is demand, what about the supply? It is the development environment. We saw why Binance made a Binance Chain, but instead of forking ETH, a Binance Smart Chain BSC jumped up. It is precisely because BSC perfectly replicates the development environment of ETH that developers are familiar with it. After a set of development tools, he will not easily learn other skills. He can lie down and never sit. BSC instantly has millions of users, and the development ecology is gradually developing. The basic needs of users are met, which is the specific value of these projects. But why are the PEs of these Fork projects generally low? Are you not original? The market discounts your creativity. If you do some micro-innovations every day, you will lack the judgment of the industry structure and the lack of deep research on the technical level. , what you do may be seen by ordinary users with a non-professional background at a glance. There are amazing products and amazing creativity. Without creativity, there is no efficiency. Lost high growth expectations, the natural market will give you an undervalued. Does anyone care about this? Does anyone value investing? Growth is the epitaph of the price. When you suffer a terrible loss, you will also grow. You don’t care and I don’t care. There is always a small wave of people who survived the previous round who care. This is why any investment market is destined to be gradually professionalized and institutionalized. Why is it so difficult to make money in the stock market, and why is Internet entrepreneurship so involuntary? Because the bonus period has passed, our industry is not high enough in penetration rate, at least there are growth dividends, and the currency circle will gradually solidify in the future, and the skyrocketing and plummeting will eliminate retail investors. I also hope that you can find suitable ones in the future. Location.
Finally, there is the crown of Binance’s ecology, SafeMoon, the dog king of the three worlds. (One more reminder, don’t think this is for your participation.) The following is our internal technical analysis, let’s take a look at it publicly.
In the past week, under the influence of the richest man, Doge has become unprecedentedly popular, and the currency price has also ushered in a new high. At the same time, communities at home and abroad began to look for the next Doge: the new project SafeMoon quickly entered people's sights with its slogan of "rewarding holders, punishing sellers", and started a skyrocketing trend.
As of this writing, SafeMoon's data is shown in the figure:
Total market cap of $8.5 billion, of which 40.6% of the tokens have been burned, i.e. a circulating market cap of $5.05 billion
795330 addresses
More than 2 million transactions
Live 54 days 9 hours
……
How did SafeMoon reach a staggering $5 billion market capitalization in just 50 days?
Putting aside all market and human factors, a simple analysis is made from the technical level of smart contracts. In view of the fact that SafeMoon's smart contract is completely copied and pasted from another project PIG, next, we will use PIG's contract code to make a brief analysis.
At present, four-digit new tokens are added every day on the BSC chain, at least 50% of which are PIG contracts. Currently, more than half of the tokens with a market value of more than 10 million US dollars in circulation on the BSC chain are also PIG contracts. Therefore, the contracts of tokens such as PIG and SafeMoon are collectively referred to as "PIG contracts". It can be called perfect. The reason why it is called the perfect dog contract is because of the following three characteristics:
Hold and mine
SafeMoon has a 10% fee for each transaction, 5% of which is automatically distributed to all token holders
For each transaction, regardless of buying or selling, the contract will automatically distribute 5% of the handling fee to all currency holders according to the proportion of currency holders, that is, "holding is mining". For SafeMoon, since 40% of the tokens have been burned, it is equivalent to 0.05*0.4=2% of the handling fee will be burned, and the remaining 3% will be automatically distributed to the token holders as a holding bonus reward. Note: here is that every transaction will get dividends, perfect!
As a new project, SafeMoon has been able to make it to today, thanks to the "holding and mining" contribution - encouraging investors to hold steadily and not sell. It is roughly estimated that the annual dividends of newly added coins can reach 50-60% (floating according to transaction frequency and quantity)
However, this is not the biggest reason why SafeMoon can be so successful. The second feature "liquid self-growth" is the key to SafeMoon becoming the three kings of BSC, ETH, and HECO.
Mobility self-growth
SafeMoon charges a 10% handling fee for each transaction, of which 5% is directly added to the liquidity pool, that is, to achieve "liquidity self-growth".
https://BSCscan.com/address/0x8076c74c5e3f5852037f31ff0093eeb8c8add8d3#internaltx
Through this link, you can see the transactions that are automatically added to the liquidity pool for each contract. Due to the high market value of Moon, each liquidity addition reached an astonishing 3600BNB.
Through the contract, we can see that Moon will add liquidity when the number of tokens in the contract address is greater than 500000000000: sell 250000000000 tokens, which is 50%, and then sell the BNB obtained with the remaining 50% tokens1 : 1 pair added to Moon's liquidity pool
As we all know, new projects generally face the problem of insufficient liquidity in the initial stage of the pool. If there are no investors who actively add liquidity to the pool, the depth of the pool will be driven by the increase in currency prices alone, which is equivalent to a drop in the bucket. Therefore, many projects without liquidity self-increasing function will mostly face the problem of insufficient pool depth, which greatly hinders the further development of the project.
As can be seen from the above figure, Moon’s liquidity pool already has 230 million US dollars. If there is no liquidity self-increasing function, at the current currency price, without any external active liquidity injection, it is estimated that there will be 230 million US dollars in the pool. No more than $40 million, which is a jaw-dropping difference. The depth of Moon's current pool is so good that all local dog players are amazed. This is mainly due to the perfect contract function of self-increasing liquidity.
burn deflation
Moon burned 40% of the tokens. Due to the 5% dividend function, 2% of the handling fee was actually burned directly, which caused Moon to continue to burn deflation.
To sum up, the ingenious design of the above three major contract features is the fundamental reason why SafeMoon can become the first dog king in the three chains.
As an aside, the reason why Uni’s PIG model was not as bright as BSC’s back then was because the Gas was too high, Uni’s transaction frequency was too low, the handling fee was low, dividends and liquidity were added less, and the power of the contract was not too obvious. BSC, the transaction frequency is more than 10 times, and the advantages of the PIG model are infinitely magnified, so the exponential explosion, which also makes us full of expectations for the L2 deployment of Uniswap and the arrival of V3. After all, the preheating of these silky projects may be Appetizers for L2 Uniswap.
PIG is the first token of this kind of "Perfect Earth Dog Contract" to be launched on the entire BSC chain and the entire network. SafeMoon is a completely copied and pasted PIG contract code, but Houlang's market value far exceeds that of its predecessors and originals.
I collectively refer to the coins of all Fork PIG contracts as "PIG mode".
The "PIG mode" probably accounts for 50-60% of the daily newly listed coins on the BSC chain.
The "PIG mode" accounts for more than 60% of the coins issued within the last 50 days with a circulation market value of more than 100 million U.S. dollars on the BSC chain.
The "PIG mode" accounts for more than 40-50% of the coins issued within the last 50 days of the BSC chain with a market value of more than 10 million U.S. dollars.
The circulation market value of the BSC chain is 1-10 million US dollars, and the "PIG mode" accounts for more than 70% of the coins issued within the last 50 days.
100% of the recently active dogs on the HECO chain are all in "PIG mode".
So far, we have sorted out the whole trend of Doge/SafeMoon. When I saw the Moon data, I was dumbfounded. A towering tree with a market value of tens of billions of dollars quietly appeared in an unfamiliar corner. The myth of creating wealth in the currency circle is lamented, but it is also amazing. The unpredictable creativity of the currency circle is so fascinating. What's even more exciting is that this is just the tip of the iceberg in the field of cryptocurrency, and there are countless new continents waiting for everyone to explore. Every seed planted in every inch of soil may grow into a huge forest. What you cultivate , is an era.
