Fantom network’s Tomb Finance DeFi application has gained quite a bit of publicity over the past year. This has caused a large number of forks to a bunch of different blockchains. Oddly enough, there haven’t been many forks on the Binance Smart Chain.
Bomb Money changed that when they forked Tomb Finance on the Binance Smart Chain. They have the project a few twists and it’s had some level of success in the short term. This article will go into detail about how Bomb Money works and whether or not this project is a scam.
What is Bomb Money?
Bomb Money is a DeFi application on the Binance Smart Chain. It was launched by anonymous developers in December 2021.
Anyway, if you’re familiar with how Tomb Finance, then you already have a pretty good idea of how Bomb Money works. For those unaware, here’s a basic breakdown of how it works.
First, the purpose of Bond Money is to create a 10,000:1 Bitcoin pegged token ($BOMB) on the Binance Smart Chain. However, it does not do this by holding any Bitcoin in reserve like other stablecoins. Instead, the $BOMB maintains its peg by adjusting the circulating supply of $BOMB token.
Bomb Money has a few different tools available to maintain the peg. These include the following:
If $BOMB goes over the peg, then Bomb Money will add more supply to lower the price. Anyone staking a token called $BSHARE will receive these new BOMB tokens.
If BOMB token drops below the peg, then BOMB holders can exchange their BOMB tokens for a token called BBOND. BBOND can only be exchanged when the price of BOMB rises over the peg. Exchanging BBOND for BOMB also has a small redemption bonus.
This reduces the supply and should (according to the whitepaper’s logic) raise the price of BOMB to the peg.
There’s also some buy pressure when the price of BOMB is below the peg because people can essentially buy Bitcoin at a discount… if the price ever rises above the peg.
How to Make Money With Bomb Money?
There are a few ways to make money with Bomb Money, but it all basically comes back to yield farming and staking.
First, you can simply provide liquidity to the BOMB-BTCB liquidity pool and then put the BOMB-BTCB LP tokens in the Bomb Money autocompunder or manually compound the rewards yourself.
It’s also possible to put BOMB-BTCB LP tokens into a Bomb Money farm to earn BSHARE tokens. BSHARE holders can then stake their BSHARE in the Boardroom to earn BOMB when the price of BOMB is above the peg.
Finally, holders of BOMB can stake their tokens for XBOMB, which is the governance token of Bomb Money. These tokens can be sold on the open market or they can be redeemed for BOMB. It’s possible to make money redeeming XBOMB for BOMB to earn some profit if the exchange rate is favorable.
We know that’s a lot to take in at one time and probably sound confusing. It’s really not that confusing once you start toying around with the protocol, though.
The Problems With Bomb Money
Bomb Money has the same set of problems as every Tomb Finance fork, and most of the same problems of Tomb Finance. Here are those problems:
There’s No Need For a Bitcoin Derivative on BSC
The first problem is that there’s no need for a Bitcoin derivative on BSC. BTCB works perfectly fine and does not have any liquidity problems.
This means the demand for BOMB for it’s stated purpose is actually pretty low. Really, the only real demand for BOMB is for people to purchase it in order to get LP tokens to stake or farm.
That’s not sustainable.
Bomb Money has anonymous founders, which is a red flag. Projects that have anonymous are way more likely to exit scam than projects with doxxed founders.
People do not want their name associated with scamming, so they do everything they can to remain anonymous.
There’s Nothing To Recover The Peg
The final problem is there’s nothing to recover the peg.
Yes, we know that the supply of BOMB will reduce when the price goes below the peg, but that’s not enough to maintain a peg.
There needs to be some sort of arbitrage. Basically, people need to be able to swap their BOMB for BTC (or BTCB) in order for the price to gravitate back to the peg – this causes an arbitrage opportunity that will push the price back up. Simply cutting the supply won’t automatically cause the price to rise because reducing the supply does not increase buying pressure.
That’s the problem we see with Tomb Finance and all the forks of it. They operate under the assumption that reducing the supply will increase the buying pressure, which is a false assumption.
There needs to be buying pressure from an arbitrage opportunity for the price to rise. DAI has this mechanism in place because it’s possible to swap DAI for ETH at a 1:1 ratio when the price of DAI drops below the peg. Arbitrageurs purchase DAI en masse, driving the price of DAI up, when it drops below the peg.
Is Bomb Money a Scam?
So, Bomb Money may or may not be a scam. We cannot read the minds of the developers to know their true motives.
Note: It’s probably a scam, but we can’t say that with 100% certainty.
However, what we can say for certain is that this project is not sustainable for any significant amount of time. It might last a few months or it could crash tomorrow.
It’s basically a project that uses clever tokenomics to maintain the price of an unbacked token. The project will collapse once it runs out of new investors that provide buy pressure to the token.
We will put it this way – if people stop buying BOMB, then the token will not be able to maintain a peg. And there’s really no reason for anyone to buy BOMB once it drops below the peg because it can’t be redeemed for anything of value (BBONDs have no value until the price rises above the peg).
Is It Possible To Make Money With Bomb Money?
Yes, it is possible to make money with Bomb Money. We are sure that some investors (and the founders) have made a lot of money with this project.
However, it requires taking profits at regular intervals because you do not want to be holding any Bomb Money token bags when the project inevitably collapses or the founders rug (exit scam).
We tend to avoid projects like this, but it’s certainly possible for an experienced DeFi investor to make money.
To wrap things up, Bomb Money is just another Tomb Finance fork, but on the Binance Smart Chain. It still has all the same problems as Tomb Finance and will fail in the long term.
That said, an experienced investor can make money with it if they regularly take profits and avoid holding BOMB for any length of time.