SAFEX - A brief history and its potential for the future?

Note: This article received an edit in September 2022, to bring it up to the current project status, as much of the original article was outdated.

In the Beginning…

SAFEX (or SEC [Safe Exchange Coin], as it was originally known) was originally launched on the Bitcoin blockchain (OMNI). For convenience, I’m using the term SAFEX (uppercase) throughout this post, when referring to the original coin. Safex Tokens/Safex Cash, as written here, refer to the new coins on the Safex Blockchain.

Unlike ICOs, where developers retain a significant percentage of Tokens for themselves, the SAFEX project creator, Dan Dabek, committed to retaining only 1% for developers, with the remaining 99% to be distributed via a crowdsale.

Upon completion of the crowdsale, the official numbers were as follows: of the 2,147,483,647 coins minted, 2,126,008,805 (98.999%) were sold, which raised the equivalent of $50,579.06 in a combination of Bitcoin and Maidsafe coins (where the Maidsafe protocol was originally intended to be the supporting platform upon which the marketplace would be built).

$1.00 would have bought you ~42,461 SAFEX. As a reference point, Bitcoin was in the $400-450 price range during the crowdsale.

The original project had the intent of creating a small application marketplace utilising the Maidsafe blockchain, and was based on “an amorphous contract system that will allow us all to trade freely, and easily to the point that it will be fun to transact knowing what the deal is strictly even before engaging it” (https://forum.safex.org/t/officially-safe-exchange-crowdsale/38).

A Change of Direction…

Ongoing development of the Maidsafe protocol didn’t align with the requirements of Dan’s vision for his decentralised, anonymous marketplace, and the project subsequently lagged.

The sharp rise in Bitcoin prices during late-2016 and 2017 gave the SAFEX project new life, as funds suddenly became available to commence in-house development of SAFEX as a standalone project. Side note: An issue of the rise in Bitcoin prices was the associated cost to transfer SAFEX between Wallets.

The new project goals were outlined by Dan in a series of development updates over the course of 2017. These announcements included reference to the payment of dividends to token holders. Although the SAFEX tokens also have utility functions, which includes voting rights, a major exchange made the decision to delist SAFEX, most likely due to the potential for SAFEX to be seen as a security token. Another exchange followed suit a short time later. That was in December 2017.

It should be noted that Dan has legal opinion which supports the notion the SAFEX Tokens are indeed Utility Tokens.

The Safex [Blockchain] Blue Paper was released in early 2018.(https://github.com/safex/archive/blob/master/BluePaperRevisedNovember52020/Safex_Blue_Paper_Nov_5_2020_revision.pdf)

Safex Blockchain (originally termed Chille as a project working title) mainnet launched in September 2018. (It should be noted that Dan originally announced that the blockchain would launch Q2 2017, and a series of delay announcements followed. I don’t have a problem with the delays, as I’d much prefer a good product delayed, than a bad product launched to a rigid schedule, but I mention it simply to offer an unbiased record of what has unfolded).

With the launch of the Safex Blockchain mainnet, SAFEX moved from the [OMNI layer of the] Bitcoin Blockchain to the Safex Blockchain in a:

• 1:1 burn/redemption of SAFEX token (BTC/OMNI) to Safex Token (Safex Blockchain).
• 0.5% Migration Airdrop of Safex Cash to SAFEX Token Holders when transitioning to the new blockchain (to seed the wallets with the currency of the blockchain)
• 0.5% Safex Cash allocation to the devs.

The original Proof-of-Work mining algorithm was Cryptonight and GPU efficient. However, exploitation by unknown third parties saw the block difficulty getting manipulated and the blockchain being stalled, sometimes for days. Changes were made to the block difficulty calculations to address the issue. Explanation from Dan:

The blockchain was subsequently forked to the CPU-efficient RandomSFX algorithm.

The Safex Cash emission curve, designed by Ivana Todorovic, is a revolutionary S-shape, based on the Diffusion of Innovations Model and is intended to follow the rate of marketplace adoption. Half of the Safex Cash will be mined in first 7 years, while the other half will be emitted in the following 13 years (20 years total = 1,000,000,000 Safex Cash). Safex Cash is divisible to 10 decimal places.

The Safex Marketplace has a flat-rate 5% sale commission fee, and the entirety of the 5% fee gets distributed to eligible Staked Safex Tokens.

Target Launch of the Safex Marketplace was Q2 2018. Dan and the team took up residence in new office space in Belgrade, Serbia thanks to Balkaneum, the company launched by Dan to bring the SAFEX project to completion.

Highlights to Note…

Transition to Safex Blockchain & Safex Cash Airdrop

There was a 1-year migration window (November 2018 to November 2019) provided for SAFEX token holder participation. The Safex Cash airdrop coincided with the Token Swap. As indicated above, 0.5% of the Safex Cash will be airdropped to token holders. This equates to 0.0023 Safex Cash per SAFEX Token migrated. (eg. Swap 100,000 SAFEX Tokens to the new blockchain and you also received 230 Safex Cash).

Creation of the Marketplace

Marketplaces, in any market sector, evolve with adoption. Amazon evolved, eBay evolved, Alibaba evolved. It is the natural progression from a startup endeavour to a strong and vibrant economic powerhouse. The devs have given this due consideration when putting together the various supporting elements that will underpin the Safex Marketplace.

The devs hired by Dan/Balkaneum to complete the marketplace code successfully forked Monero and created a 2-coin (Safex token & Safex Cash) blockchain for the mainnet launch in 2018. However, at this point the project again seemed to stall, and delay upon delay followed.

Dan set several timeline goals for the devs to bring the marketplace code to life, however, those dates came and went without result. Eventually, the devs were let go, and from an outside observer's perspective, it would seem they weren't up to the task.

Thankfully, in about August 2019, Dan met Igor Grkavac, a Serbian dev with exceptional coding skills. Igor was brought onto the team and got up to speed with the project at about the same time as the other devs were let go - about September/October 2019. At this point, Igor, with guidance from Dan, single-handedly took over coding the various functions of the marketplace.

Each marketplace function created was subsequently tested by the Safex community testing group, and was tweaked by Igor, as needed, to remove bugs and improve things. Multiple testnet versions were launched during late 2019 and the first half of 2020, as the various elements were brought to life, to create a functional marketplace ecosystem.

The second half of 2020 saw several Stagenet iterations of the marketplace undergo further testing and streamlining, as improvements continued to be made to strengthen the code, to ensure stability for the blockchain.

Launch of the Safex Marketplace

In December 2020, Safex Blockchain hardfork 7 saw the various marketplace functions of the blockchain come to life when mainnet block 605,700 was found.

A merchant account was created by Dan and he listed a tea cup for sale for 1000 SFX, which was subsequently purchased by Brian Dordevic, as the commemorative first sale of the Safex Marketplace.

Of course, having a blockchain capable of functioning as a privacy-conscious global marketplace is one thing. Having an easy-to-use interface to access that marketplace is quite another. The launch of the marketplace only came with a cli wallet, not a pretty gui wallet.

My observations of the crypto legal climate in 2020, particularly in the USA, where Dan was once again based, led me to believe that releasing an open-source GUI wallet for a privacy-focused blockchain marketplace could see such a project getting into legal strife, either with the SEC, or some other government entity, if that blockchain/wallet was subsequently used for illegal purposes. So it was no surprise to me when a full-function GUI wallet wasn't freely released as part of the Safex open-source project.

However, being open-source, the Safex code is freely available for third parties to use. So while open-source development stopped with the launch of the Marketplace, Dan found a way to continue progressing the project, albeit slower that many of the community would like.

Launch of Safex.Market

In what I believe to be a sensible approach to protecting himself from a legal standpoint, Dan subsequently founded TWM Inc, a private company which has used the open-source Safex code and created:

• Safex.Market, a curated listings platform, and
• the Safex TWM Wallet, a gui wallet, which currently allows sending coins, Staking/Unstaking Safex Tokens, and purchasing items listed for sale on the curated Safex.Market.

This is similar to the way all sorts of blockchain companies have sprung up around Bitcoin, which is also open-source (eg. bitcoin.com and their GUI wallet).

As at September 2022, Safex.Market is currently in its pilot phase, is making reputable vendor partnerships, and is seeking to raise funds for further development. Dan has indicated that once funds are secured and staff are in place to manage the workload, then the Safex TWM Wallet v2 will be released, which will allow others to create Merchant accounts and start listing their goods for sale on the marketplace.

Developers and preexisting online merchants looking for a crypto-based marketplace backend for their website or mobile apps should be able to easily integrate it into the system.

If the 5% sales commission fee is lower than the competing marketplace providers, the Safex Marketplace will be an attractive alternative, or simply an addition to, a merchant’s customer base.

Safex Cash Emission Curve

It cannot be understated just how important the chosen emission curve is to the overall success of the marketplace. The Diffusion of Innovations Model used by the team is designed to stabilise (ie reduce volatility) the Safex Cash price during the initial seven years of marketplace growth. The Safex Cash emission curve has been designed to match the forecast marketplace adoption.

A thorough explanation of the Diffusion of Innovations Model and why it was chosen for the Safex Cash emission curve can be found at https://safexnews.net/diffusion-of-innovation-and-safex/.

Financial Considerations…

As indicated above, the 5% marketplace commission fee will be distributed to SAFEX token holders as a dividend. However, only Safex Token Holders who Stake their tokens will be eligible to receive their share of the fees. The fewer tokens that are staked in, the greater the return per token.

As an example, if you owned 100,000 tokens and the marketplace did the equivalent of US$1 billion in turnover for a set period of time, the dividends received, on a per token basis, would change, depending upon how many tokens were staked.

If every single token was staked (ie. no tokens being traded on exchanges or simply sitting idle in wallets), then the dividends for the above example would equate to US$2,328.

• If 10% were not locked in: US$2,587
• If 20% were not locked in: US$2,910
• If 30% were not locked in: US$3,326
• If 40% were not locked in: US$3,881
• If 50% were not locked in: US$4,657

That is the approximated returns per 100,000 SAFEX Tokens per US$1 Billion turnover for any given period of time, whether it be per year, per quarter, per month, etc. The timeframe makes no difference to the numbers, other than to see that an increase in marketplace turnover will provide those returns on an increasing frequency.

On 16 Feb 2018, Medium.com username - Kiyoshi Hirohito published an article, entitled “In-depth Overview of the Valuation of Cryptocurrencies: Case Study — The Safex Token” (https://medium.com/@KiyoshiHirohito/in-depth-overview-of-the-valuation-of-cryptocurrencies-case-study-the-safex-token-24429281bc0b).

Kiyoshi exams the placing of a true fiscal value on cryptocurrencies and of the concept of dividend-paying tokens. He then goes on to analyse Safex (once it reaches project implementation) from the perspective of a regular revenue-generating economic e-business.

If you’re at all interested in passive income generating tokens such as Safex, then reading the above Medium article is a must.

So, where do I see Safex going in the future? Well, when Dan eventually released the Safex TWM Wallet v2, and other merchants can start to list their own goods and services for sale, then I truly believe it will change the landscape of online trading for decades to come.

For merchants currently using other e-commerce platforms with much higher commission fees, the 5% rate on the Safex Marketplace is an attractive alternative. The ability to remain anonymous and keep your purchase history private will be a refreshing change from the targeted advertising, customised prices, selling of personal data, etc that other well-known e-commerce sites currently employ against shoppers.

Current Project Status…

The Safex project is currently situated as follows:

• Marketplace is live and functioning.
• As at 21 September 2022, with the Safex.Market pilot phase still in effect, there have been almost 2.5m Safex Cash spent on 342 purchases on the marketplace, and there is over $2.5m dollars worth of goods listed for sale.
• Revenue share is being generated from each sale, for those holders who have Staked their Safex Tokens.

Exchange Info…

xCalibra.com has pairings for both Safex Tokens and Safex Cash.

Bitrue.com has pairings for Safex Cash.

Final Thoughts…

My 2018 thoughts were:

I’ve seen several complaints that Dan hasn’t released the White paper or published any code on GitHub. Personally, I’m glad he hasn’t given away too much free information. Given the current climate of hard forking, it would be stupidly easy for a group of well-financed devs to create a competing project. I’m very happy for Dan to keep his cards close to his chest until everything is ready for a full launch, and then he can hit the Go button.

In general, if Dan and the team succeed in bringing this project to fruition, I have no doubt he will be spoken of with reverence in the decades to come. Something like, ‘Oh, you know that Dan Dabek. He’s the Elon Musk of the crypto world.” It is a visionary project that could very well tip the current e-commerce system on its head.

I only got into crypto in December 2017, so much of the information presented here has been gleaned “after the fact” from various sources, most notably the Safex Forum website and the Safex Discord channel. I imagine there are many on this forum who only recently got into crypto, and may not yet have come across the SAFEX project. I prepared this post for those people and anyone who may have heard about it previously, but it dropped of their radar, for whatever reason..

My 2022 thoughts are:

Although progress has been slow, Dan has continued to push the project forward. Many hurdles have been overcome, and there's currently a live fully-functional blockchain-based marketplace running smoothly.

If funding can be secured to further Safex.Market development and expansion, then I see no reason why Safex marketplace wont continue to grow and become adopted by a significant userbase. Adoption of the marketplace is the key to future success.

Privacy coins seem to be getting target by governments. Hopefully, this doesn't impact the future use case for Safex.

Full Disclosure: I own Safex Tokens. However, I am not trying to hype the project in an effort to increase token price with a view to selling. Given the passive income generating economic model of the Safex Marketplace, I don’t have plans to ever sell my Safex Tokens.

I am not a financial analyst. The above information should not be construed as financial advice and is not intended as financial advice. Always do your own research before investing in anything. The price of Safex coins may be volatile, and purchasing cryptocurrencies can be a high risk activity.