IMPORTANT UPDATE
TRUNK has depegged by 27% on PancakeSwap, and the price of ELEPHANT isn’t looking too good after an exploiter sold tens of millions of dollars of ELEPHANT. The exploiter has moved most of the funds through a cross-chain bridge, after sending it to multiple alt wallets. The funds will likely require much on chain analysis with various tools to pinpoint the endpoint, but will likely be siphoned through mixing services.
The charts, as well as relevant links, are below.
You may have heard about Elephant Money before. Project on BSC, operates a stablecoin, has 205% APR on that stable coin, and… wait, 205% APR? On a stablecoin? Yes, you read that correctly, but don’t let that fool you into believing that it can last.
How it Works
Elephant Money is complex, (To obfuscate the true mechanics) so I’ll try and simplify it while keeping all the important information, for the sake of time.
Elephant Money is a protocol that operates a multi-collateral stablecoin. This means that the stablecoin is backed by more than one asset. In this case, two tokens: BUSD & ELEPHANT. The stablecoin is named TRUNK. TRUNK is backed by 75% BUSD, and 25% ELEPHANT.
ELEPHANT is the other token for the protocol. ELEPHANT has a supply of 1 quadrillion (Common thing to see in projects that want you to feel like you have more money than you actually do.) 49% was burned instantly, AKA: The supply is just 510 Trillion. The burn exists to make the token seem more sound than it actually is.
Elephant Money also has burn balancing, in a system known as the “graveyard” Which, as far as I understand it, basically just rebalances the burn wallet to ensure that 50% of the supply is always out of circulation.
Signs of a Scam
Elephant Money has many features, which are designed to make it much more complicated than it needs to be. Now, complexity does not mean a project is a scam, but Elephant Money has many features that, no matter how the token and protocol are designed, make it a scam. Let’s talk about them.
ELEPHANT Taxes.
The protocol charges taxes on all ELEPHANT transactions. Specifically, 10% on every transaction. (5% goes to liquidity, 5% is paid to existing holders) This is a common feature of scam tokens. Or, in this case, taxed tokens that are known as “Reflection Tokens” Think, Safemoon.
When you buy the token, you immediately lose money, and when you sell, you immediately lose money. The only way to even get back to where you started is to get more people to buy after you. In traditional investments, the price goes up when people buy, and down when people sell. Simple. With ELEPHANT, that also happens when people buy and sell, but it also puts you at an immediate loss, with the only way to recover it being to bring more people in, and put them at a loss, and then they have to do the same, and so on.
Seem familiar? “Unusually high rate of return” (205% APR) “Money from subsequent investors is used to pay the promised returns to earlier investors” With ELEPHANT, you get 10% taken from you, which is used to pay all earlier investors, and are then promised a return from all new investors, which is the only way to break even, let alone make a profit.
Where Does the APR Come From?
When you bond TRUNK to start earning the 205% APR, it’s immediately locked. You can only withdraw your interest. 50% goes to the Elephant Treasury, & 50% goes to the liquidity.
Now keep in mind, TRUNK is 75% backed by BUSD, so to offer 205% APR, you need to also provide that interest on the BUSD. For example:
You invest $100 > 75% of that is BUSD > Protocol needs to earn 205% on 75 BUSD to back the new TRUNK tokens
So where does the APR come from? The website, whitepaper, and articles written on this are actually quite unclear. As far as I am aware based on the comments from the community, the Elephant Treasury backs these rewards, which remember, took 50% of your now irretrievable investment when you started. So the protocol can simply pay you back 50% of what you originally put in before it has to get yield from any other source.
So what happens after that? According to various sources, the Treasury will just… sell ELEPHANT to buyback TRUNK from the market. Selling ELEPHANT at a rate of 205% of the current amount of bonded TRUNK is not a sustainable model. The treasury relies on new investments to generate more ELEPHANT to sell for TRUNK, and the price of ELEPHANT will be continually pushed down by the constant selling for TRUNK.
Summary
To strip away all the complex mechanics, here are the two main reasons why, no matter how deflationary the token, or how long the APR runs for, the project is a scam.
- The protocol needs to have people mint more TRUNK, by using BUSD and ELEPHANT, and then sell that for ELEPHANT, to allow the Treasury to keep buying back TRUNK from the market to pay the 205% APR. This can’t sustain itself, as users have no incentive to do so, when they could just trade their original token for ELEPHANT.
- The protocol taxes ELEPHANT holders, and reflects it back to liquidity, and other ELEPHANT holders. This is also done more indirectly through the locked staked TRUNK tokens, which are used to pay the interest to all holders through the Treasury. This is a common, simple Ponzi mechanic in many scam tokens such as Safemoon. It puts you at an immediate loss, and requires new investors just to break even.
Thank you for reading! If you enjoyed, give the article some claps to spread it around! I’m not a financial advisor, so please don’t take this article as financial advice. It’s an opinion piece, not a research paper done by a professional! If I missed anything important about the protocol that I should have covered, don’t hesitate to tell me in the comments! I want to ensure that my articles include all the relevant information, and the protocol is so complex with all the taxes, credits, reflections, etc, that I may have missed out on something!
If you enjoyed this article, and want to read more of my articles exposing scams, you can check out my article on DRIP (Which is actually inspired by the project Elephant Money is forked from) or you can read about HEX, the long-running cult-driven scam coin that had its ICO funds mysteriously drained, and has deceptive claims of 10000X gains! Cheers!
