Taking a closer look at the Uniswap vs Sushiswap saga and its effects on the wider reputation of the DeFi movement.
The ongoing war between decentralised exchanges Sushiswap and Uniswap is pretty entertaining, at least if you’re watching it from a safe distance.
The unsavoury episode is, however, threatening to further undermine the decentralised finance (DeFi) movement that, for many, shows so much promise.
The saga ignited in late August. Sushiswap set the cat among the pigeons with the launch of a governance token that paved the way for a massive migration of assets from Uniswap to its rival. Indeed, at one stage, it was claimed $1.27bn — some 77% — of liquidity was locked in Sushi contracts.
At that time, Uniswap did not have its own governance token, which in hindsight — given the demand for SUSHI tokens — appears to have been a mistake.
Sushiswap was accused of “leaching” Uniswap and being a DeFi “vampire” as it effectively allowed users to give control of their Uniswap tokens (UNI) to the rival exchange and earn tokens for doing so. Sushiswap then began migrating assets from one exchange to the other.
Short and sweet
The SUSHI token value soared from $3.7 to $11 in just a few days, but the celebrations were short.
Chef Nomi, the founder of Sushiswap, cashed out his tokens for Ether, worth about $14m, and the SUSHI token’s value immediately plummeted in value.
Unsurprisingly, the heat was on for Chef Nomi (not his real name), and the vitriol was fierce from the community. Parallels were drawn with dodgy ICO practices (not for the first time in the short history of DeFi), and the cries of “exit scam” were loud.
Chef Nomi claimed he had not done anything wrong, apologised, returning his proceeds back to the treasury, and saying he would let the community decide how much he deserved.
Pertinently (for this article at least), Chef Nomi also said he was “very sorry for bringing a bad reputation to the DeFi movement.”
On September 16, Uniswap announced the launch of its own governance token, UNI, with an airdrop worth $1,200 to all users who had previously used the exchange.
Uniswap users finally got the governance token they seemingly craved, while Sushiswap continues to lose liquidity.
There are lessons to be learned on all sides but, one thing is sure, the respectability of DeFi is tarnished by such episodes.