Sushiswap founder Chef Nomi copied the open-source code of Uniswap to make Sushiswap. It was meant to be exactly the same as Uniswap except that it added a token named SUSHI which will be rewarded to Liquidity Providers and token holders.
What is Uniswap?
Uniswap is a Decentralised Exchange (DEX) in which any token(ERC20) can be added by funding it with an equivalent amount of ETH. By this process, it creates a liquidity pool and thus guarantees a swap can always happen. Trading fees are distributed among Liquidity Providers and a token is issued to the depositors representing their deposits in Uniswap.
Sushiswap presented itself as an “Evolution of Uniswap” and said to be community-owned with 10% reserved as “funds for development ”.Sushi provided a way to participate in the governance of Sushiswap. Sushiswap distributed trading fees and Sushi to Liquidity Providers. Sushiswap planned to suck Uniswap’s liquidity by a process called Vampire Mining. Through this mechanism, depositors can earn Sushi by depositing their Uniswap’s Liquidity Provider tokens. These tokens can then be swapped for the underlying asset, thus converting Uniswap liquidity into Sushiswap liquidity. Increased engagement and its plausibility have attracted liquidity worth $1 billion into it ever since its inception.
Sam Bankman-Fried came in
FTX CEO Sam Bankman-Fried by now had become a big SUSHI whale and two wallets linked to Alameda Research (led by him) had farmed at least 9% of SUSHI in existence as claimed by Alex Svanevik (co-founder of blockchain data firm Nansen).
By Sep 5, Chef Nomi was holding about $13 million worth of Sushi (as a development fund) and he traded it all for ETH on Uniswap. Thus, Sushi prices tanked by more than 70% in one day.
Sam Bankman-Fried laid down the way forward for SUSHI and asked Chef Nomi to give up the control. Chef Nomi agreed and transferred the control of SUSHISWAP to Sam Bankman-Fried. In two days following the transfer of control, a bug threatening its liquidity was found in its code but was later fixed.
By Sep 14, the token had rebounded from $1.2 low and is hovering around $2.32 with about $803 million still locked in Sushiswap.
This incidence depicts that the expectations of Defi participants have changed. Participants expect protocols to share governance (via. Community ownership) and revenue with them and the best way to execute this strategy is by means of governance tokens. Those who don’t adopt this strategy are likely to be forked and will pave their own path.
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