SushiSwap Reminds Community DeFi Shouldn’t Be Seen As A Lucky-Spin
The DeFi sub-culture is now attributing to over $8.5 billion worth of crypto assets, primarily subject to the Ethereum Blockchain and other minor chains working on staying relevant in the global race for Decentralized Finance supremacy.
While the term and the overall crypto-clique started and got popular over time with the introduction of MakerDAO and its governance token MKR, DeFi is now much sophisticated than loans and stablecoins backed by the broader MakerDAO ecosystem.
DeFi Pioneers And Leading Projects Come And Go In A Matter Of Days
MakerDAO led the field with a 55%-60% slice until just a couple months ago, although we now see enormous entries that tend to out-throne the DeFi king regularly.
At the moment you’re reading this, the popular lending platform AAVE is sitting on top of the hill with a 17.82% dominance, addressing for over $1.5 billion worth of Ether (Ξ), as well as other widespread ERC-20 tokens.
Probably the most exciting DeFi project tho, one that fits and interacts pretty much with any other industry dapp, Uniswap, used to bare the DeFi scepter with a near $2bn total value locked (TVL) pouch until a counterfeit project dubbed SushiSwap managed to virtually snatch, or ‘migrate’ in their terms, over half of Uniswap’s native liquidity.
Uniswap was the first decentralized exchange (DEX) to win over Ethereum users’ hearts, by offering a one-pager tool with a clean-cut UI and easy to grasp UX, where both amateur and experienced Ethereans could swap ERC-20 tokens with no sweat and directly from their web3 compatible wallets of the likes of Metamask.
Read More: Ethereum Now A Victim Of Its Own Success
DEXs Is The New ICO-Like Paranoia – The SushiSwap Drama
As naturally expected, a lot of Uniswap copy-cats, counterfeits, and even scams pretending to be the popular Unicorn-labeled DEX, started to pop-out in an attempt to attract some of the users flooding the smart-contract oriented exchange in a rapidly increasing fashion.
Among some of the most successful aggregators, you can find 1inch.exchange, the Social Money focused Roll.exchange, as well as projects like SushiSwap, a semi-troll copy of Uniswap created by an anonymous actor using the handle ‘Chef Nomi’.
Now, if you were in the crypto scene for some time, it should come as a no-questions-asked scam. Nevertheless over-excited investors and inexperienced DeFi explorers didn’t hesitate to jump in, considering they got lured by other DeFi services such as yield farming promoted with food names (HAM, YAM, etc.) in the past quarter.
Although most of the projects showcased an extraordinary ROI in a matter of weeks, all while having buggy, un-audited, and often on-purpose broken smart-contracts to back them, these projects attracted hundreds of millions worth of cryptocurrency in funding in the promise of generating a stable and secure profit on top of interest rates to their respective customers.
In SushiSwap’s case, while the project was supposed to be a decentralized autonomous organization (DAO), following Maker’s model up to an extent, the creator of the DEX’s contract, Chef Nomi, was the only one eligible to access the private keys associated with the funds locked in the smart-contract, not only alarming caution to investors but in fact brutally abusing the fact, with minimal regrets as to how his followers and supporters would feel about it.
In a nutshell, Chef Nomi managed to pull near 34,000 ETH, at that time worth something around $14 million to his personal account, before obviously being stonethrowed both by the SushiSwap supporters, as well as the broader DeFi Twitter community.
Relevant Article: An Objective Look Into Yield Farming: Worth It, Or Modern Bubble
His action was immediately condemned by developers working close or directly affiliated with the project, whose reputation Chef Nomi didn’t bother to dirt for a fast and aggressive self-profiting scheme.
Followed by other crypto enthusiasts, academics, and DeFi pioneers, the pact team involved in the development of the protocol started to shame Chef Nomi in a 24/7 fashion, and if you ask me, I’d say for a damn pretty good reason.
It wasn’t before the incident started to raise international concerns, with regulatory and financial watchdogs initiating in-depth research of the project, Chef Nomi followed his previous Tweet explaining he didn’t do anything wrong, suggesting people should know where they invested to, citing that he felt sorry, and had returned the amount stolen from SushiSwap users, providing a tx-hash that seemed to confirm his claim.
While many felt relief they’d be able to recover their five-digit, six-digit, and in some-cases seven-digit figure investments, others kept firing at Chef Nomi, pointing out that he shouldn’t have followed that path in the first place, proposing that he should entirely quit the project and the scene for good.
Aggressive commentator’s stressed how this kind of action is against what crypto communities are struggling to promote, and short-visioned profiteers such as Chef Nomi himself would only make things more difficult in terms of mass promotion and widespread crypto adoption.
DeFi Is Full Of Mines No-one Is Willing To Acknowledge
A previous example of unethical DeFi practices would be the infamous CDP liquidation protocol that allowed a bot to claim legally over $34 million worth of ETH during the Covid-19 downtrend earlier this March.
Thanks to vague and buried behind tiny letters protocols, MakerDAO’s collateralized debt positions could be liquidated under a certain pre-designed route of auctions, literally, no-one was aware of until it was too late, essentially giving a bot the ability to gather enormous amounts of ETH by bidding 0 DAI unlocking them.
Similar to Chef Nomi’s first response, MakerDAO’s governing council noted that this was not a bug, neither a system failure, throwing the blame to the lack of understanding of how CDPs work.
It is true that DeFi projects are gaining excessive popularity in 2020, and under some lens, one could say that it can be dubbed as the ICO era of modern times.
Projects launched last week, with zero documentation, beta contracts, and near no testing can be subject to seven-figure cashflows from one day to another, causing unhealthy arbitrary opportunists to push often broken projects further in the DeFi surface instead of seizing them in the first place.
Concluding, my personal take is that people who engage in extremely volatile projects without doing the necessary research, and without assessing the level of transparency a project offers, including team member details, smart-contract data, and other factors, are victims of their own greed and deserve the projects they invest in.
Sure, some investors, especially newcomers in the scene, usually randomly invest in a diversified portfolio without doing any research at all, basically engaging with DeFi in a gambling fashion, and again, they should be aware of the facts, if not deserve to lose their funds as would be expected with any gambling scenario.
What are some DeFi projects you’re following, and which ones you’d rather not touch? Let me know your thoughts on the matter in the comments section below, or feel free to hit me on Twitter.