The Reason Why Most Burn & Re-Distribution Meme Coins Are Buggy
Just recently, we’ve seen a wave of meme lords aping into meme tokens such as Safemoon, Ass Finance, Hoge Finance & Sanshu Inu.
What do those tokens all have in common, making them look so attractive to people with an IQ below 50? It’s their burn & redistribution mechanism!
Some even take a liquidity fee to allegedly increase the liquidity pool. Let’s take a dive into how that shit works, why most projects are not keeping their promise, and why Bobo Cash is superior to all of them.
Burn fee, distribution fee & liquidity fee — What’s this shit about?
With every transaction on the token, a certain percentage fee is taken from the transaction amount. This fee is usually made up of a burning fee, a distribution fee, or a liquidity fee. Sometimes even all of them.
The Burn fee:
A certain % of the transaction amount is taken as a fee and sent to the burn wallet:
Since nobody has access to that wallet, the tokens are lost forever and reduce the supply. You’ll understand that this is good for the token holders as a reducing token supply supports a price increase.
The more transactions occur, the more tokens are burned. Deflationary stuff is good for your wallet.
The distribution fee:
A certain % of the transaction amount is taken as a fee. But this time, instead of burning those tokens, they are distributed amongst token holders weighted by their token holdings.
This is a great incentive to hold the token for a passive income. The more tokens you hold, the higher your share of the reward. Again, for the retards: Reward = Distribution fee taken from transactions.
The liquidity fee:
A certain % of the transaction is taken as a fee. These tokens are accumulated in the token contract itself until a specific threshold is met. Once that happens, half of the accrued tokens are dumped for Ethereum first. After that, the remaining tokens in the token contract and newly acquired ETH are added to the liquidity pool.
The idea behind this is an increasing liquidity pool that reduces short-term spikes in the price movement to the downside when large sells occur.
In theory, this sounds pretty cool, but in reality, it will never work. In fact, it is counterproductive and puts constant sell pressure on the token. We’ll talk about this later.
If you still don’t get it, here’s an example of a transaction scenario of a token with a 1% burn fee, 2% distribution fee, and 2% liquidity fee:
Bobo tries to impress your sister and sends her 1 million $ASS tokens.
1% Burn fee: 10,000 tokens are burned.
2% Distribution fee: 20,000 tokens are taken as a distribution fee and redistributed to all token holders weighted by their token holdings.
2% Liquidity fee: 20,000 tokens sent to the token contract.
So your sister receives 950,000 tokens (+ the redistribution from rewards). Now that even you understand how those meme tokens work, it’s time to look at the flaws of those tokens. We will keep this as non-tech and retard friendly as possible.
Issues of the tokenomics
As an example, let’s take a look at ASS Finance, Safemoon, and Sanshu Inu. More or less, all those projects are pretty much the same since the smart contract codes of meme tokens are pretty similar.
Issue #1 — Legit token holders do NOT get the total rewards that were deducted as distribution fees from transactions
With many of those meme tokens, the biggest wallets are often the burn wallet and the liquidity pool contract of Uniswap or Pancakeswap.
Ass Finance: As stated on their website, Ass Finance takes a 5% distribution fee and a 5% liquidity fee. The #1 ASS holder is the liquidity pool contract of Pancakeswap that holds 26% of the supply. The #2 holder is an exchange wallet with 11.6% of the supply.
This means that more than 36% of the rewards don’t go to the token holders but to other smart contracts and exchanges. From our experience, those exchanges rarely pass on the rewards to their users. Instead, they’d dump them slowly over time. Free money for them on your expenses.
This problem could theoretically be solved by excluding/blacklisting those contracts/addresses from rewards. All those meme projects even have a function to do that:
We replicated ASS Finance on the Rinkeby Ethereum Testnet and found out that even when excluding a specific address/contract from rewards, rewards are still lost. Yes, the excluded wallet/contract doesn’t receive rewards anymore, but those rewards don’t go to the token holders.
Those rewards are LOST. They don’t appear in any other wallet. The reason for this is a logical coding error:
When excluding an address from rewards, it needs to be updated in two places: Mapping and an array. The mapping is used when we query a user’s token balance. The array is used when we calculate how much of the redistribution to make.
The excluded addresses are only added in the mapping and not in the array in the code of other meme tokens. Therefore those excluded addresses still get distributions, but since the code doesn’t update their balances, tokens get lost. You can check it on the test net where we forked ASS Finance:
We minted 10 quadrillion tokens, added 50% of it as liquidity to Uniswap, and excluded the liquidity contract from rewards. Afterward, we sent 1trn tokens from wallet A to wallet B.
As expected, a 10% fee (100bn tokens) was deducted. Only half of them were redistributed to the token holders (Wallet A and Wallet B). The other half got lost even though the 50% supply holding Uniswap liquidity pool contract was excluded.
This bug is a problem in likely 99% of the meme projects out there as the project owners simply copied and pasted the code without inspecting it further. For example, Safemoon and ASS Finance use the exact same contract code.
It’s even worse for Sanshu Inu. 61% of the supply is held by the burn wallet, which means that 61% of the 1% reward go to the burn wallet.
To sum up: The majority of rewards are lost depending on the token holder distribution. Excluding specific wallets doesn’t fix the problem in those projects due to logical coding mistakes.
Issue #2 — The Automatic liquidity feature creates a constant sell pressure and adds no value to the liquidity pool
The idea behind this sounds fucking epic, right? Deduct a fee from a user transaction, swap half of it for ETH, and add the token pair to the pool. Increasing liquidity = Less spikes to the downside if someone dumps a large number of tokens.
Yeah, the token would get short-term dumps whenever the smart contract of the token dumps half the tokens, but in the long-term, an increasing liquidity pool should help, right?
Unfortunately, there is one thinking error in this. We’re only adding “one-sided liquidity.”
An example showing the flaws of automatic liquidity:
- 5% liquidity fee
- LP consists of 5 ETH and 200trn tokens
- The threshold for the AddLiquidity function is at 5 trillion
- Let’sLet’s ignore burn and re-distribution to keep it simple
Step 1: Wallet A sends 20trn tokens to Wallet B.
→ Wallet B receives 19trn tokens since 5% got deducted as a liquidity fee for the contract.
Step 2: The token contract now holds 5trn tokens (4trn + 1trn from the transaction) and meets the threshold to sell and add the liquidity via the function.
Step 3: Uniswap requires a 50/50 split for each pool. The contract swaps half of the tokens (2.5trn) for 0.065 ETH and then adds the other half alongside the 0.065 ETH to the liquidity pool.
→ During the swap, 2.5trn tokens join the liquidity pool, while 0.065 ETH gets removed. (+2.5trn tokens | -0.065 ETH)
→ When adding liquidity, the contract adds 2.5trn tokens and 0.065 ETH (+2.5trn tokens | +0.065 ETH)
→ When we combine both transactions, we end up with an addition of 5trn tokens, while the ETH balance stays ~0. (+5trn tokens | ~0 ETH)
To sum up: The liquidity pool doesn’t increase as only the amount of meme tokens increases in the liquidity pool. The amount of ETH stays the same, and therefore large dumps can still make the price spike extremely to the downside. Instead, the automatic liquidity mechanism harms the price since once the threshold of accumulated tokens in the token contract is met, half of those tokens are dumped.
As you can see, most of the meme tokens turn out not to be what they claim to be. Bobo identified those bugs and fixed them. The result was Bobo Cash.
$BOBO holders enjoy the full reward distribution of the 4% redistribution fee, the 1% deflationary burn mechanism, and no useless automatic liquidity dumps.
We predict that Bobo will fulfill its fate and sent those broken tokenomics projects to 0 while Bobo Cash absorbs its market capitalization. #road21bn
That’s it from us. Choose your side wisely.
PS: If you don’t share this article on /biz/, Twitter, and other meme coin channels, Bobo will insta nuke BTC to 14k and liquidate all of you peasants.