Anyway SafeMoon’s trick was that if you sold your SafeMoon tokens, the SafeMoon protocol would take a 10% “tax.” Thus buying was good and selling was bad, which kept a floor on the price. (For a while.) Half of the 10% tax was used to pay the yield on the other tokens: If you sell your tokens, you pay 10%; if you hold your tokens, you get half of the money that the sellers pay. This creates a further incentive to hold, and the yield that makes the whole thing attractive. This was called “reflection”; SafeMoon’s whitepaper said:
“[T]he reflect mechanism encourages holders to hang onto their tokens to garner higher kick-backs which are based upon a percentages [sic] carried out and dependent upon the total tokens held by the owner. In theory, with the manual burn function … even a small holder at the beginning could potentially walk away with big money at the end of the token’s lifespan.”
The other half of the 10% tax was allegedly stolen by the developers, which is why they are in jail now.
Source: SafeMoon – Bloomberg
