Will the DEX world that VC has just laid down be divided by local tyrants in the community?
Text | Edited by Nancy | Produced by Bi Tongtong | PANews
DeFi is in the lead, and the throne of Uniswap's "DEX big winner" has not yet warmed up. A group of "uninvited guests" represented by Sushiswap came to the market.
This past weekend, Uniswap reached a new milestone, with daily trading volume surpassing that of the established trading platform Coinbase for the first time in history. At present, the trading volume of Uniswap continues to set new historical highs, even accounting for more than half of the total trading volume of DEX.
The skyrocketing rise of various DeFi tokens is undoubtedly an important factor for Uniswap to enter the highlight moment. Judging from the data of the past few days, SUSHI, the SushiSwap governance token, is the "big contributor" to the increase in Uniswap's daily trading volume. As of the publication, Uniswap has a lock-up amount of US$1.91 billion, and SushiSwap occupies 64.9% of its liquidity pool, with a lock-up amount of US$1.24 billion.
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Make up for the gap in Uniswap? "Sushi" sets off wave of paid votes
Just like the name of "Sushi" in Chinese, SUSHI is attracting the attention of investors and capturing the hearts of top trading platforms. Yesterday (September 1), SUSHI landed on the three major exchanges of Huobi, OKEx and Binance in one go, and then its price rose all the way, reaching a peak of $11.17, and it rose nearly 14.4 times in four days. Although the price of SUSHI has fallen back, the high yield and crazy scene are obvious to all.
"The DeFi market is changing too fast. I ate 'sweet potatoes' and 'grapes' yesterday, and 'sushi' today. I just learned about a new project, and the price has already skyrocketed." Many players complained. Although SUSHI has become an unavoidable topic of discussion in major communities or private exchanges, and even triggered the "SushiSwap Fork wave", such as YUNo Finance and KIMCHI.finance, many people are still confused about it.
Hayden Adams, the founder of Uniswap, couldn’t sit still. He even criticized on social platforms yesterday that SUSHI is just something that any capable developer can create through a day’s efforts. This is just a "whale game" played by giant whales, trying to capitalize on the hype and value created by Uniswap.
So, what is SushiSwap that is getting so much attention? Similar to Uniswap, SushiSwap also adopts the AMM (Automatic Market Maker) model to reward users who provide liquidity. But the difference is that SushiSwap introduces token economic incentives on the basis of Uniswap. As we all know, when there is a transaction on Uniswap, LP (liquidity provider) can get a 0.3% handling fee reward, but when LP redeems mortgage assets and stops providing liquidity, the reward will also stop. At the same time, in Uniswap, early LPs tend to take more risks, and when large funds such as VCs and mining pools participate, their benefits are also reduced.
To this end, SushiSwap has extended the reward period, and when LP stops providing liquidity, it will still issue some rewards. Specifically, SushiSwap will distribute 0.25% of the 0.3% handling fee to LPs, and the remaining 0.05% will be exchanged for SUSHI tokens. The greater the transaction volume of Sushiswap, the higher the value of SUSHI. At the same time, in order to motivate early "farmers", according to the official introduction, in SUSHI's economic model, each block generates 100 SUSHI, which is evenly distributed to the pledgers of each support pool. The generation amount of the first 100,000 blocks (about two weeks) is 10 times, that is to say, each block can generate 1,000 SUSHI in the first two weeks, and LPs can get more than 10 times SUSHI.
Compared with Uniswap, SushiSwap is more friendly to large and retail investors, or early participants and latecomers. In addition to receiving corresponding rewards, they can also capture the long-term value of SUSHI tokens, which can be said to kill two birds with one stone. It is worth mentioning that Uniswap LP token holders can also directly participate in SushiSwap, which means they can receive both Uniswap and SushiSwap rewards. This is also the direct reason for the recent surge in Uniswap daily trading volume.
In addition, in order to add more LPs to SushiSwap, SushiSwap initiated the SIP-4 proposal. According to the rules, the top five voters will join SushiSwap, and the initial reward weight is 0.2 times. For this reason, the DeFi circle has set off a fan circle culture of "you vote for me, and I will debut tomorrow". In order to solicit votes, many projects even made the promise of "voters get one dollar for one vote, and introducers get one cent for one vote", which is enough to show the attractiveness of SushiSwap.
In the end, REN-ETH (19.92%), sUSD- $BASED (18.52%), SRM-ETH (16.82%), YAMv2-ETH (16.66%), and ETH-CRV (14.13%) won the top five and were successfully selected.
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The DEX war is coming? whose moat is wider
Since its inception, in just five days, SushiSwap has captured nearly 70% of Uniswap's liquidity and has become the darling of the market. Mike Novogratz, CEO of Galaxy Digital, pointed out that people are seeing very interesting things in DeFi, which really reminds people of Tesla. It's just a speculative frenzy, and some of these new projects do cool things, but they grow liquidity so rapidly, which is never seen in the market, such as SushiSwap.
SushiSwap's strong counterattack is due to the fact that Uniswap has not issued tokens so far. As an online celebrity project incubator, Uniswap has become a leader in the DeFi wave due to its advantages such as no listing fee, no risk of delisting, and no need for transaction depth to maintain prices. Currently, Uniswap has been updated in two versions. Among them, Uniswap V1 laid the foundation for on-chain token exchange and decentralized liquidity pool; Uniswap V2 has been upgraded and improved on the basis of the previous version. For example, any ERC20 token can be exchanged directly with any other ERC20 generation Coins form trading pairs.
In both versions, Uniswap did not propose to issue governance tokens. And SushiSwap is shaking Uniswap's dominance in DEX by virtue of its differentiated style of play. However, the development of the Uniswap V3 version has also been advancing, and it is rumored that tokens will be launched simultaneously when V3 comes out.
And SushiSwap will also migrate to LP after reaching 100,000 blocks in 9 days. Uniswap liquidity may be migrated to SushiSwap, which will inevitably trigger a liquidity war. Who will have the advantage?
From the current point of view, SushiSwap, which prefers the community, seems to have the upper hand. You must know that in the fierce battle of CEX in the past, users are the absolute driving force for the progress of the platform, and this theory is also applicable in the field of DeFi.
The VC team of Uniswap that has developed so far is growing day by day. In addition to completing the seed round of financing led by Paradigm in 2019, it also completed the $11 million A round of financing led by a16z in August this year. Therefore, if Uniswap V3 issues tokens, the first bite must be VC, not community participants. However, SushiSwap has given fairer participation and distribution power. Whether it is SushiSwap's liquidity or voting, it has shown super community attributes and made the outside world re-recognize the value of governance tokens.
However, improvements in token economy and governance design cannot serve as a moat for SushiSwap, which has yet to complete a security audit. A few days ago, the CertiK security research team pointed out that there are multiple security vulnerabilities in the smart contract of the SushiSwap project. This vulnerability may be exploited by the owner of the smart contract, and the smart contract of the project also has a serious reentrancy attack vulnerability.
At the same time, Adam Cochran, a data analyst and partner at Cinneamhain Ventures, also discovered the problem after in-depth research on the wallet management structure of the Sushiswap protocol. He noted that a wallet with approximately $27 million worth of SUSHI tokens could dump its holdings without warning. At this stage, the valuation of the Sushiswap project is already very high, so if you cash out $27 million from the project at this time, it may not be fully accepted by the community. Although the owner of this wallet did not touch the wallet, Adam Cochran suggested that the DeFi ecosystem should strengthen supervision, and he also hopes that these funds will be transferred to wallets controlled by governance votes or timelocks as soon as possible.
It is worth mentioning that YUNo Finance and KIMCHI.finance, which are continuation of the crazy imitation projects mentioned above, also have the same risk. The above-mentioned security research team pointed out that the owner of the smart contract vulnerability can increase the number of tokens corresponding to the project without limit. Leading to project financial schedule inflation and eventual collapse. At the same time, the security personnel of the blockchain security company PeckShield also pointed out that YUNo has huge security risks. The project has modified the token issuance logic, and there are malicious backdoors to allow administrators to issue unlimited tokens.
Generally speaking, even if the project passes the security audit, it does not mean that there is no risk 100%, let alone those that do not pass. It can be seen that although similar projects such as SushiSwap are "really fragrant", they also hide huge risks.
Liquidity provision itself does not have an absolute moat. Although Uniswap has led the DEX craze, as more and more similar projects have appeared or are on their way, the DEX knockout race is accelerating. For example, KIMCHI (kimchi) locked up $1 billion in funds within a few hours. "SushiSwap is a Trojan horse on Uniswap. It uses other people's space to 'support' itself. Once SushiSwap liquidity is successfully migrated, it will become a big casino like Uniswap, leaving a strong mark in the history of DEX .” In the face of the menacing SushiSwap, some DeFi players made predictions.
Of course, there must be more than one SushiSwap in the future of DEX. Perhaps, as Pi Ma, the founder of the encryption investment agency Continue Captical, said, in the state of open source, what is the moat of each project, how to face strong fork and governance improvement, really need to help the project design Token model Deep thinking.
