$SUSHI
A few friends, especially those entrenched in VC, have reached out to me over the last few days asking for a take on the $SUSHI situation. So I thought I'd start a thread to share my thoughts.
This has basically evolved in to a DeFi maxis version of reality TV. #drama
0/ First a disclaimer and transparency: I've been HODLing $SUSHI ($XSUSHI since I'm staking) since late last year.
I believe $SUSHI is undervalued.
Let's start with some background and history:
1/ Sushi is an automated market maker (AMM), a decentralized exchange (DEX) and a DeFi darling. Sushi runs on the Ethereum blockchain.
0xMaki is one of the founding members of Sushi. He operates mostly anonymously (one of the beautiful aspects about working in this space).
Sushi used to be known as Sushiswap.
2/ Sushi is a fork of Uniswap, the biggest AMM in terms of volume. Uniswap is a true pioneer in this space and has raised over $12M in venture capital from A16Z, USV, Paradigm, Version One and others. The last known funding round was in June '20.
2.1/ If you want to take a trip down memory lane:
3/ Back to Sushi: Sushi was founded by NomiChef in August 2020. Sushi's funding history is rather simple, yet probably one of the biggest and momentous events in DeFi's brief history.
4/ Now, Uniswap was the first mover and had the early advantage in the AMM + DEX space. So how does a new DEX challenge the incumbent? DEXes have a cold start problem - when there aren't enough liquid assets to trade, the DEX becomes useless.
5/ Sushiswap conceptualized something called a "vampire attack". Let's back up: When a user providers liquidity to a platform like Uniswap, they get back something called "liquidity pool tokens" (LP Tokens). These Uniswap LP tokens represent liquidity supplied on Uniswap.
6/ Sushiswap incentivized these liquidity providers to deposit (stake) their Uniswap LP tokens on Sushiswap. In return for doing this, the users were rewarded $SUSHI. There is more nuance here but with a couple of more steps, Sushiswap was able to start draining liquidity from Uniswap and move it to Sushiswap.
7/ This may sound like bad news for Uniswap, but it actually did quite the opposite. It drew more people to deposit on Uniswap.
Before Sushiswap's launch, Uniswap had $185M locked in LPs.
The Sushiswap incentive caused deposits on Uniswap to grow to $1.8B.
The migration resulted in $810M being deposited on to Sushi.
7.1/ For more on this, you should read this excellent writeup by CamiRusso:
7.2/ Soon after, Sushiswap started offering high APYs to draw people to start providing liquidity. This is what is known as Yield Farming.
8/ Sushi has an interesting history and gained some notoriety because of a weird incident back in September '20. It appeared that one of the founders of Sushi "ran away" with ~$14M in ETH:
9/ Subsequently, SBF_Alameda "entered the chat":
10/ So why is this relevant? Why take this trip down memory lane?
For one, Sushi has not raised venture capital.
Second, this product and community are ... resilient.
Third, it is a product that the community feels really invested in. Sushi maxis are hardcore.
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11/ Early this year, Sushi released their impressive roadmap for features which was going to start to set them apart from Uniswap (Bentobox, Miso etc.):
12/ For all intents and purposes, Sushi can be considered a blue chip asset. It trades on several centralized exchanges (Binance, Coinbase Pro, FTX)
This brings us to what has unfolded over the last 2 weeks:
13/ Many DeFi projects have a treasury, which holds the project's native tokens. Sushi has ~51M in the treasury, in the form of the native $SUSHI token.
On July 7 '21, 0xMaki proposed selling up to $60M (25% of the treasury at the time) to institutional investors (VCs).
14/ One thing to note is that there is occasional risk to holding the treasury in the native token:
15/ This is the open nature in which these decentralized projects operate. Proposals, community discussions and voting are all integral to how these are run.
16/ The investors on board are some of the most elite names in VC. And the appeal to invest in Sushi is really clear, especially given's Uniswap's raise and their growth.
17/ This proposal was not well received by the $SUSHI community, the 6 month cliff and the discount in particular. 62% voted negatively to this proposal.
18/ On July 16, jdorman81 from arca had a new proposal which wasn't exclusive to VCs:
19/ Of course, this proposal isn't entirely selfless but it is solid:
20/ I have founded companies but I now work in VC. So please take the following with a tub of salt:
20.1/
21/ UMAProtocol has also made a proposal using their Range Token concept, which is like a form of convertible debt.
22/ That sort of brings us to where we are right now. Sushi is in an excellent position to raise capital. When they do (not if), it will really help propel them and accelerate product development (cross-chain anyone?)
23/ But we are seeing unfold in front of our eyes the power of the community vs the power of institutional VC.
This is most likely going to be a zero-sum game.
24/ Here is an awesome thread summarizing this as well: https://twitter.com/srinathariharan/status/1416863569652584449
25/ It looks like 0xMaki is scaling the raise down to 15M-20M to work with the community.
I'll keep updating this as the situation evolves...
Builder & investor. Previously built Camino (acq. Clariti), OpenGov (acq. Cox).
3 年Sounds right to me. Been pretty long on Sushi since early days. I think uni is a bit under valued too — both are really powerful platforms.