"Fair launch" is not fair to developers, and forks that make quick money are stifling DeFi innovation

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Content overview:

• , by Ashwath Balakrishnan, translated by Lu Jiangfei, published with permission.

• If community users are too eager to seize every yield farming opportunity, it may eventually lead to DeFi from glory to decline.

• Content overview:

• The SushiSwap project popularized the concept of "fair start" in the encryption community, but it caused many people to follow suit and fork some important DeFi protocols;

"Fair launch" is a flawed concept that has the potential to seriously dent the momentum of DeFi and crypto development;

Forking a project in just a few weeks compared to years of effort to innovate clearly brings unfair rewards and risks.

If DeFi investors all start looking for short-term opportunities while ignoring long-term growth, the space could be in trouble.

"Fair start" has now become one of the hottest trends in the DeFi industry, but if inappropriate incentives are given, it may have a negative impact on the innovation of the entire industry.

To whom should the "fair start" be fair?

It may be hard for you to believe that a DeFi project can be launched in less than a month, but "Sushi" SushiSwap did it-this project forked from Uniswap has a tortuous journey, full of controversy and drama. The speed at which the "Sushi" project was launched is astounding, but at the same time the time from peak to trough is also very short. (Chain news note: When this article was written, the lock-up volume of "Sushi" had fallen from a high of 1.58 billion US dollars to 480 million US dollars per month, and it had shrunk by nearly 70% in just three weeks.)

However, the biggest impact of "sushi" on the entire DeFi industry is actually the popularization of the concept of "fair startup". Uniswap has raised $11 million from several top venture capital funds. This behavior once caused huge controversy in the encryption community. Many people felt that they violated the spirit of DeFi decentralization and pointed out that all DeFi protocols should abide by tokens Principles of Public Offering.

The reason why members of the crypto community are attracted to "Sushi" is because the project allocates 90% of the token supply to liquidity providers (LP). In contrast, Uniswap's previous behavior has made the community very dissatisfied because they After raising funds and announcing the postponement of token issuance, the reason given by the community for dissatisfaction is actually very simple: Uniswap chose not to issue tokens because of greed.

Indeed, issuing tokens allows community members to share the development advantages of the DeFi protocol. However, some people think that it is a bit selfish to "identify that Uniswap chose to refuse to issue coins because of greed", because the team is required to build Uniswap from scratch and develop it into a potential "Coinbase killer", but in the end they are required to give up what they deserve. share is not fair.

And what happened in the end must have embarrassed those who advocated a "fair start" in the encryption community:

The so-called developer fund of "Sushi" eventually became the "personal retirement fund" of the anonymous founder Chef Nomi. If it weren't for his selfish cashing out of SUSHI tokens that caused public outrage, the "chef" now has 1400 Ten thousand U.S. dollars. Fortunately, "Chef Nomi" later found out that he had returned about 38,000 ETH. The community then decided to buy back the SUSHI tokens in the market, but this measure still failed to stop the token price from falling. The community's confidence in the project Seems to have been lost.

So, what happened to Uniswap, which was criticized by the community before? Uniswap did eventually issue the governance token UNI, and the distribution plan is fairer than most "blue chip" DeFi protocols. As the community's support for UNI tokens continues to rise, the lock-up volume of the Uniswap protocol has soared to 2.18 billion US dollars, ranking first among DeFi protocol lock-up volumes at the time of writing.

You will find that if you follow the current definition of "fair start", it seems that the DeFi project will be introduced to a road of death that cannot be restored.

If someone can make $14 million in just one week by forking, will there still be developers who work hard to design projects and promote innovation in the DeFi industry?

The Reality of "Fair Launch"

Of course, we are not saying that all "fair launch" DeFi projects have problems, such as Cream Finance is an exception. The project is a fork of the Compound protocol, but it has introduced many unique new features in a different way, so to a certain extent, it has made it faster and better established its position in the DeFi market.

Thanks to the implementation of a new interest rate model and returning the fees earned by the protocol to users (Compound did not do this), Cream Finance quickly attracted a large number of users in the DeFi community, and its loan assets have now surpassed Compound - in fact, this It's the forked project that really makes sense, and while Cream leverages the Compound source code, it adds new features and makes the forked project stronger.

But the problem is that most of the so-called "fair start" fork projects in the decentralized financial industry cannot do what Cream does. Their fork seems to have only one goal: to make more money from greedy investors. It is undeniable that the cryptocurrency market is now in a bull market, which also makes many users pay more attention to how to make huge profits, rather than sinking their hearts into thinking about how to achieve real innovation.

Even scarier, the darkest side of "fair launch" is actually the impact on developers.

Let's take an example:

There is a more advanced founder of a new DeFi protocol. He/she spent two full years pouring blood, sweat and tears into the product, and finally decided to open source all codes in the name of decentralization and transparency. In terms of token distribution, the founder hopes to issue 60% of the total supply of tokens to the community through liquidity mining rewards, and at the same time sell 20% of the tokens to a group of investors to pay employees and bear Costs incurred for project development, testing, auditing, marketing and operations, and then the final remaining tokens (20% of the total token supply) are allocated to the founders and core development team.

One month after the mainnet launch of the project, the operation has been very stable. But at this time, an anonymous person suddenly appeared on the Internet, and he/she announced that the project would be forked, because this anonymous person thought it was unfair to only give the community 60% of the token supply. Instead, their forked project will distribute 95% of the token supply to the community, then put 3% in the inventory, and keep only 2% for themselves.

We can imagine the reaction of the community: everyone must be praising the "anonymous person" for achieving true decentralization, and complaining that the founder of the native protocol is too greedy.

Well, you might ask: Even if the fork project is a marketing game, but the fork project party only left 2% of the total token supply, and those native tokens that took a long time to invest in pioneering projects The founders of the protocol themselves can get up to 20% of the total supply of tokens. What is the difference between the two?

Assuming that the project in the example has a market value of 50 million U.S. dollars, it means that the "anonymous person" who forked the project earned 1 million U.S. dollars (50002%) in just one week, while the founder of the original protocol spent several Only $10 million (500020%) in one year, not to mention that there are various costs incurred in starting and running the project in this $10 million, and the "anonymous person" has almost zero cost when starting the fork project ——Now, which one do you think is more "cost-effective"?

Innovation costs more than money