Can UMA's option plan resolve the differences between the Sushi community and VCs?
This past weekend, the debate between the SushiSwap community and VCs captured the attention of the entire industry.
Let us briefly review the beginning and end of this incident. Earlier this month, 0xMaki, the co-founder of SushiSwap, launched a project on the official governance forumStrategic Financing Proposal, it is suggested to sell some of the SUSHI tokens held by SushiSwap Treasury to several venture capital institutions to diversify the Treasury’s holdings and leverage the resources of these investment institutions.
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Note: The selling price calculation method given by 0xMaki
This proposal by 0xMaki has caused an uproar in the SushiSwap community. As of 10:00 on July 20th, Beijing time, 271 replies have been accumulated under the discussion thread of the proposal, making it the most discussed and read in the history of the SushiSwap governance forum. s post. Judging from the response attitude, the vast majority of community members questioned or even opposed the proposal of 0xMaki. In order to convince the community, several VCs such as Lightspeed Venture Partners and Pantera Capital subsequently left comments at the bottom of the post to explain, emphasizing that their own institutions It can play a role in the future development of SushiSwap. that's all,The first big debate between the community and VC in the DeFi industry was officially staged。
On the whole, the SushiSwap community’s doubts about the proposal can be roughly divided into two levels:The first level is, based on the actual operation and development status, does SushiSwap need financing at present? The second layer is, if financing is really needed, is the token sale plan given by 0xMaki reasonable?
It is difficult to have an absolute criterion for the first-level questions, and we will not discuss them in the following articles. Even though SushiSwap does not lack funds in daily operations, each project has its own development plan.If SushiSwap believes that the value of resources provided by VC can cover the future selling pressure brought about by selling tokens at a discount, then financing is positive.
The key lies in the second layer, that is, whether the token sale plan given by 0xMaki is reasonable. Specifically, the community's doubts focused on the following two aspects:
The discount is too high and the lock-up time is too short;
There are too many participating institutions and their functions overlap. Individual institutions may not work with money, but just want to arbitrage through discounted chips.
Regarding these two issues, members of the SushiSwap community have been expressing their opinions in posts these days, detailing the pros and cons. With the deepening of the discussion, it has basically become the consensus of the community to oppose the token sale plan given by 0xMaki. Based on this background,The star synthetic asset project UMA proposed an alternative financing plan on July 16, aiming to use the form of call options to bridge the differences between the community and VC, and to find a solution that can satisfy both parties.
Once the proposal was proposed, it immediately attracted widespread attention from the SushiSwap community, and discussions on whether the proposal was feasible also became a major focus of the second half of the post.
Specifically, UMA suggested that SushiSwap provide investment institutions with a new synthetic token "Success Tokens". 1 synthetic token consists of 1 SUSHI + 1 call option (expiration value is paid in SUSHI), its price can be equal to the spot price of SUSHI, but its value is greater than the spot itself. At a certain time in the future, if If the price of SUSHI can exceed a certain threshold, the call option will be activated, and institutional investors can also obtain greater returns.
In UMA’s solution, there are three parameters that can be adjusted: one is the selling price of Success Tokens, which can be equivalent to the spot price of SUSHI, but it can also be adjusted slightly according to the actual situation; the other is the expiration time, that is, when will it be settled The first option; the third is the specific execution price of the call option. How to set various parameters can be decided after discussion between the community and VC.
As one of the most competitive synthetic asset agreements, UMA's move is obviously "pull work" for itself. There is no need to hide this. The pioneering spirit of "finding problems - solving problems with your own strengths" is A necessary quality for a high-quality project. If this synthetic token financing scheme can run smoothly, it will undoubtedly expand a new business line for UMA, which can improve the liquidity and competitiveness of the agreement. However, this is not the focus of this article. What we really want to discuss is whether this alternative to UMA is advisable?
Objectively speaking,This alternative to UMA can better solve the two problems mentioned above in the short term.
The first is the problem of "the discount is too high and the lock-up time is too short". If the Success Tokens scheme is adopted for financing, SushiSwap will no longer need to sell tokens at a discount; Limited to the option exercise price, if the expiration date is set too early and the SUSHI price fails to trigger the threshold, the option will become a piece of paper.
The second is the problem of "there are too many participating institutions and their functions overlap, and individual institutions may not work with money". The non-discount sale of Success Tokens can reduce the participation willingness of institutions with arbitrage as the real goal to a certain extent, which will help In addition, the call option can further bind the interests between the project and VC. Only when the project develops well and the token price rises can the VC get their "bonus". Of course, the rise of the price of SUSHI does not depend on the efforts of VCs. In theory, VCs can still "paddle", butCompared with the sale at a discount, VC under the new plan will have more motivation to promote the future development of SushiSwap (if the currency price falls, the option will return to zero, and the spot loss will be magnified relative to the purchase at a discount).
From the perspective of community sentiment, UMA's proposal has also won the support of some community members, but at the same time, a large number of community members still have doubts about the proposal.The focus of doubt is how to set the parameter of "option exercise price".If the price is set too high, it will dissuade VCs from investing; but if the execution price is set too low, the option value will continue to rise as the currency price rises. In the long run, VCs are still buying more at a lower cost. chips, the converted discount may even be much higher than the 30% upper limit in the 0xMaki plan.
UMA’s proposal does provide SushiSwap with a brand-new financing path, and it also solves some practical drawbacks of the discounted sale plan in the short term. However, if the timeline is extended, it still does not jump out of the idea of “exchanging benefits (discounts) for VC support”. A basic property, but also brings some new complexities. The selling price, option execution price, and unlocking time, the setting of each parameter has a profound impact on the long-term development of the project. Therefore, how to set the parameters in combination with future expectations will be the biggest difficulty in the UMA proposal. Prediction is inherently difficult, and the volatility of cryptocurrencies exacerbates the difficulty.
In order to diversify risks, UMA's plan may be further refined, and the two parameters of unlocking time and execution price can be further split, and changed into one-step execution as gradient execution, but this also has certain disadvantages, that is, it will make the original Complicated matters are further complicated.
All in all, if SushiSwap finally chooses to adopt the UMA solution, the community needs to conduct more comprehensive and detailed communication with VCs to understand their actual expectations for the future development of SushiSwap.
At present, the SushiSwap community is still having heated discussions on whether financing should be carried out and how to execute it. In addition to UMA, some other members have proposed alternative financing execution plans. 7.51% of xSUSHI (call options) are held in circulation. Bi’s investment agency Arca even proposed a magical plan to buy coins at a premium... How will the event develop in the end? Can the differences between the community and VCs be resolved? Odaily will continue to pay attention to the report.
