SushiSwap Comes for Uniswap as DeFi's Unicorn Flies Highest
Also, Yearn Finance releases yETH vault, bZx relaunches after attack.
|Aug 31, 2020||2|
Hello Defiers! Here’s what’s up in DeFi,
SushiSwap, a fork of Uniswap, is coming for Uniswap’s liquidity with the help of its SUSHI token and a juicy yield menu
Yearn Finance launches yETH Vault to maximize ETH yield
bZx relaunches after attack with focus on security
and more :)
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Check out the just-released video on The Defiant’s YouTUbe channel, covering the latest on this week’s governance wars involving Yearn Finance, Curve and 1inch. The video was produced in partnership with Robin Schmidt of Harmony Protocol.
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Uniswap Fork is Coming for the DeFi Darling’s Liquidity
A liquidity war is brewing between Uniswap and a fork of DeFi’s darling DEX, called SushiSwap.
Don’t let the flippant name and emoji throw you off; Sushi means business. In less than a week, SushiSwap has aggregated more than $800M worth of tokens, or about 80% of total Uniswap assets, according to Sushiboard, which tracks the project’s data .
This isn’t just another liquidity-pool based DEX that’s popped up to compete with Uniswap: SushiSwap is coming to directly take Uniswap’s liquidity.
In the first phase of the project, traders stake tokens representing deposits in Uniswap’s liquidity pools (Uniswap’s LP tokens), in exchange for SUSHI tokens. In the second phase, traders are meant to migrate those Uniswap LP tokens for the underlying assets and take them to the SushiSwap DEX.
Positioning themselves as “an evolution of Uniswap with SUSHI tokenomics” SushiSwap uses a Yam-inspired interface to present traders with a “menu” of Uniswap liquidity positions they can lock up in exchange for the SUSHI governance token.
Image source: sushiswap.org
2,000% APY for Umami Squid
APYs on these pools currently range from about 500% to over 2,000% for the highest yielding option, the UMA-ETH pool (Umami Squid on the menu). More on the vision here.
Larry Cermak @lawmasterI must say though, seeing the anon dev who had 100 followers yesterday ratio some established accounts is a sight to behold. https://t.co/d63E9niDis
While many were quick to write off SushiSwap as the next token to be farmed and dumped to zero, what’s happened over the weekend suggests there may be life for the anonymous-backed project.
SushiSwap’s plan to bootstrap its native AMM by sucking Uniswap’s liquidity is aptly called “Vampire Mining.” Over the next two weeks, governance tokens will be distributed at 10x the base rate of 100 SUSHI per block, meaning 1,000 SUSHI will be minted per block, to incentivize early farmers.
After two weeks have passed, SushiSwap will seek to migrate all of the staked Uniswap liquidity positions to SushiSwap positions. On average, 86% of total liquidity in the 13 Uniswap pools with LP tokens is currently being staked in SushiSwap.
“I don't think SushiSwap will succeed just by copying recipes” SushiSwap developer 0xMaki told The Defiant. “It needs to invent its own. Custom fees, modified price algorithms, single-sided liquidity. Anything from Bancor, dxSwap, Dodo and more can be inspiration for a community owned AMM.”
0.05% of Fees
The new SushiSwap will function similarly to Uniswap. In Uniswap, which has no native token, 0.3% of trading fees are proportionately distributed to the pool’s liquidity providers. In SushiSwap, 0.25% goes to liquidity providers, while the remaining 0.05% gets converted back to SUSHI through SushiSwap, and distributed to SUSHI token holders.
Some are now theorizing that Uniswap could end the whole project’s hype by releasing its own token in a forthcoming Uniswap V3 upgrade. However, in this journalist’s opinion, the dynamic team at Unsiwap does not seem like one whose hand can be forced when it comes to something as monumental as a native governance token.
After reducing the risk of exit scamming by adding a 48-hour timelock on admin functions and partnering with Quantstamp to officially audit the contracts, the degen DeFi farmers of the world are starting to treat SushiSwap as more than just a money printer.
As for governance, the first Sushi-Improvement Proposal was passed, with SUSHI/ETH LP’s voting to increase the reward allocation to those “taking the most risk” by being in the most volatile pool. While the SUSHI/ETH pool currently has a 2x multiplier on rewards, the new proposal will increase that to 5x, or 5000 SUSHI per block during the first two weeks.
Elites vs Anons
As SushiSwap continues to gain traction, so does the community contention.
On one side of the coin, founders of popular projects like Dharma, 0x Protocol and Uniswap have openly expressed their disdain for SushiSwap, stating that a successful migration would be “terrible for LPs and traders” due to fragmented liquidity.
On the flip side, popular anon accounts like Degen Spartan have signaled their support for a “community-owned AMM LP protocol,” versus VC funded projects, like Uniswap which raised $13M from giants including a16z and USV.
Regardless of where you fall, the community is clearly at odds. Yield farmers are starting to form a union, one in which innovation is a must, and any delays in sharing upside with users is ushered in by a fork.
The long-term builders are skeptical. SushiSwap’s unaudited, high-risk, high-return nature poses a threat that, as Hayden Adams states, “attract(s) more people who are a part of gambling culture and discouraging people who are here for the social movement.”
But, the team sees it differently.
“SushiSwap is an experiment in protocol governance to see if the community is ready to lead themselves,” 0xMaki added. “They are the ones who this restaurant was open for. Without them there is no point in pursuing this adventure”
Claiming that the 10% developer share can be seen as a treasury governed by LP’s, 0xMaki claims SushiSwap can be “a Michelin Starred establishment with quality yield.”
The fire seems to be fueling DeFi to new milestones. For the first time in history, Unsiwap’s 24h trading volume was higher than Coinbase - the leading US crypto exchange.
We’ll let you decide whether or not SUSHI played a role in it.
Hayden Adams 🦄 @haydenzadams🤯 Wow, @UniswapProtocol 24hr trading volume is higher than @coinbase for the first time ever 🦄 Uniswap: $426M 🏦 Coinbase: $348M Hard to express with how crazy this is. https://t.co/48o0xRkiUo
Yearn Launches yETH Vaults
Yearn Finance, the DeFi protocol which allocates digital assets to the platforms which offer the most yield, added an ETH-based strategy.
Yearn’s yETH Vault will deposit ETH in MakerDAO to draw Dai, and deposit the borrowed Dai into Yearn’s own Dai vault, which maximizes yield for the stablecoin.
To build this strategy, the Yearn team needed to incentivize traders to save the Maker vault from liquidation, and for that, it needed access to Maker’s ETH/USD Oracle Security Module. The Maker community approved the proposal in a vote Friday, paving the way for the yETH launch today.
Yearn Finance’s popularity has exploded in the past few weeks, thanks to the launch of its native YFI token, the first digital asset on Ethereum to be sold entirely to Yearn users, with no allocation to team members or investors in the project.
YFI rewards have incentivized hundreds of millions of dollars to flow into Yearn. Some are speculating the latest yETH Vault will further fuel Ethereum’s native currency as the protocol draws ETH to the strategy.
DeFi protocols like Yearn sucking ETH into their smart contracts are set to compound with the launch of Ethereum’s proof-of-stake chain, or Phase 0 of ETH2.0. PoS requires the network’s nodes to stake ETH, which is set to be a huge liquidity drain for the cryptocurrency. Meanwhile, almost 5% of total ETH in circulation is already in DeFi smart contracts.
bZx Relaunches With Focus on Security
After suffering a critical loss to the tune of $1M back in February, lending and margin protocol bZx is back with vengeance with the relaunch of its products, Torque and Fulcrum this afternoon.
Prioritizing security, bZx 2.0 features an enhanced UI and new features including Flash Loans, Collateral Managements, Gas Token integration, Order Histories and Liquidation Engines.
The pairing of a lending protocol with a margin exchange aims to offer a holistic protocol experience in DeFi, and it’s all governed by a community DAO.
The bZx team is hoping to lure the wave of yield farmers flocking to DeFi.
“I think a lot of people are really anticipating a platform that offers a wide range of tokens for leveraged trading and borrowing, especially as yield farming has made obtaining DeFi tokens without price exposure extremely alluring,” bZx co-founder Kyle Kistner told The Defiant.
A few weeks back, bZx made waves with the listing of its native governance token BZRX. The Initial Uniswap Listing pushed the price of the token up by more than 20x, where it has since reached new highs thanks to a listing from Binance.
Whether it be the slice of protocol fees directed back to LPs or the novel use of an executive branch for governance, bZx has placed a significant amount of effort into creating a dashboard for BZRX holders to capture upside from the protocol’s second life.
The protocol now offers a transparent, liquid view at investor’s holdings. A vested version of BZRX, vBZRX is viewable on-chain, alongside a liquid secondary market and a means of using vested tokens to participate in governance.
For the hungry farmers out there, the relaunch features an attractive bootstrap period with 0.5% of the total supply being released each week based on the amount of fees generated from protocol usage. For reference, this is 3.5x more than what Balancer distributes in BAL, and roughly 25x what Compound distributes in COMP over the same time intervals.
All eyes are on bZx to see if this push can bring the protocol back to its former glory of a top contending lending protocol in the wake of TVL surging on market leaders like Aave and dYdX.
Five executives of CoinMarketCap, including interim CEO Carylyne Chan, are out, The Block reported. Four other executives who left are Spencer Yang — vice president of operations, growth and revenue, Jeremy Seow — vice president of products, Matthew Lippl — global head of design and growth, and Jared Chin — project lead and head of events. The mass exodus comes just four months after Binance acquired CoinMarketCap for about $400 million.
Coinbase announced on Monday that prominent venture capitalist Marc Andreessen is joining its board, alongside Gokul Rajaram, who is an executive at DoorDash and a veteran of Google and Square. The moves come amid chatter that the San Francisco-based cryptocurrency giant is preparing to go public, Fortune reported. A source close to the company speculated that Coinbase could wait until mid-2021 to announce an IPO, in part because the company is exploring the use of tokens as part of the offering, and that it's awaiting regulatory approval to do so.
Crypto investor Andrew Kang analyzes DeFi tokens using their price to earnings ratio.
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About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.