A Chat With John Deere, The Anonymous Dev Behind Swerve, The Latest DeFi Fork

"Eventually, incentives will run out, and the strongest ecosystem will survive," Deere told The Defiant.


Hello Defiers! This week’s interview is with the anonymous developer behind Swerve, a fork of Curve Finance. He goes by the name John Deere, and claims to have stripped away all the questionable pieces of the stablecoin-focused decentralized exchange.

Curve is less than a year old but was able to soar up the ranks to become the fourth DeFi protocol with the most value locked, crossing the $1B mark two weeks ago. Its popularity initially grew thanks to the tight spreads between stablecoins, enabled by its unique pricing curve (hence the name), and to the returns traders can reap from providing liquidity to its pools of tokens.

Most recently, activity skyrocketed thanks to the launch of its native CRV token. But arguably, that’s when the troubles started, at least with part of DeFi users who were turned off when an anonymous farmer, supposedly unconnected to the team, launched the token without warning. The next incident was the team’s “overreaction” to lock up CRV in the protocol, which left them with more than 70% of voting power, and more recently the controversial addition of a Huobi BTC pool.

This is what John Deere claims Swerve is here to fix with the protocol unveiled last night — not without a few hiccups with the UI, which had some calling “pre-mine,” while others attributed to an honest mistake. The issue was fixed and in the few hours since launch, 970 addresses have deposited more than $377M in the protocol’s pool of stablecoins.

Swerve is the latest in what’s a rising movement in DeFi, where tokens must be fully owned by protocol users, governance is completely run by token holders, any point of centralized control over smart contracts becomes suspect and as much value possible must be distributed to token holders. Otherwise, the protocol risks getting forked. SushiSwap arguably spearheaded this trend, by attempting to fork Uniswap, though it’s unclear what the fate of that project will be after the anonymous account behind it converted all their SUSHI to ETH.

It’s unclear whether these projects, with no audits, no known teams, and launched seemingly overnight, will be able to rally communities and development forward, beyond the initial hype and without losing users’ funds. Or whether anonymous cartoon characters on Twitter, inside jokes and memes, will inspire the confidence needed to build strong open-sourced protocol able to deliver lasting value to users.

It could be that we’re witnessing the rise of a more open, community-led paradigm being born. But that’s not to say some will use these grand ideals to take the money and run, while conveniently disguised behind a funny avatar. So be careful out there farmers.

[The interview with John Deere below was done via Telegram chat on Wednesday, except for one section done today]

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Camila Russo: So tell me about Swerve.

John Deere: Swerve is a fork of Curve designed to be owned and governed by the community and liquidity providers that use it. As a protocol, Swerve has the ability to swap between stablecoins at a far better rate than other exchanges and venues.

There is great value in this as a protocol and Swerve believes that liquidity providers and the community of users who use it should be in control of its future.

The Swerve protocol is governed by a Swerve DAO and will issue 100% of its governance tokens to liquidity providers as reward incentives, instead of the 62% allocated in Curve. We believe long term this will result in a better protocol, as it gives all the power and future direction to the participants who actually use it.


Image source: http://ipfs2.swerve.fi/#/

CR: Who controls the Swerve DAO?

JD: The holders of the Swerve token (tentatively named $SWRV) are in entire control of the Swerve DAO. The DAO will be the owner of all the protocol contracts, and all changes to the protocol or DAO must be voted on and approved by SWRV holders.

CR: Can you tell me more about the "tokenomics"?

JD: Yep.

There will be 33,000,000 tokens total in existence, and the distribution will be over the course of 6 years. To incentive the migration of liquidity to Swerve, the initial two weeks will reward a higher percentage of the supply to liquidity providers. The schedule is

First 2 weeks: 9,000,000 SWRV
Year 1 (after the 2 weeks): 9,000,000 SWRV
Year 2: 3,000,000 SWRV
Year 3: 3,000,000 SWRV
Year 4: 3,000,000 SWRV
Year 5: 3,000,000 SWRV
Year 6: 3,000,000 SWRV
Total: 33,000,000 SWRV

They will be issued in proportion to a providers supplied liquidity in comparison to the total liquidity provided in Swerve, in the same way CRV rewards are distributed.

CR: Will liquidity pools in swerve be exactly the same as in curve?

JD: Swerve will initially deploy with just one pool, the Y Pool [DAI, USDC, USDT, TUSD] and leave the addition of future pools up to the decision of the DAO. The Y Pool on Curve generally the most in demand and has 60-70% of the TVL, and we want the providers to be able to decide which pools they want to exist and participate in instead of launching with and allocating rewards to additional pools they may or may not actually want to provide liquidity for.

The Y Pool will be exactly the same.

We hope it will solve a common initial farming problem, where providers are paying high gas costs to hop between many pools in search of the highest yields (in result, not actually providing liquidity for their intended or ideal pair or pool)

CR: So LPs who provide liquidity to the Y pool will get SWRV in exchange?

JD: Yep, exactly. You can provide the underlying asset (ex: DAI).

CR: Why did you feel it was necessary to fork Curve?

JD: DeFi should be about building better systems than what exist today. DAOs should be governed and controlled entirely by its community of users, not by its development team, founders and shareholders.

We have already seen the implications of this with the Curve founder locking his high balance of CRV and taking control of 70%+ of the governance voting power, and more recently, with the questionable addition of the (pre-coded and deployed) hBTC pool proposal. Without a fair distribution and equal opportunity launch, there will always be powerful stakeholders with other possible alternative incentives.

We believe liquidity providers should be properly rewarded for the risk they take when bootstrapping such systems.

And thus, have a fair and real voice in its future developments and governance

CR: will you / the swerve team be the initial liquidity providers? and how big is the team?

JD: It is just myself, but I say we as I hope to represent all fair and honest farmers 😊. I am just a simple farmer and developer, I have not thought much about if I will participate but my funds are nothing larger than the average user, it would not be a significant or large amount of capital by any definition.

I hope with a 100% fair distribution that smaller farmers will be able to participate more reasonably. If gas costs don't ruin all the fun :(

CR. Crazy. How much will it cost to deploy this?

JD: It's not as bad as the Curve deployment, a lot of contract code is removed because there is no pre-vesting stuff (that took a lot of their deployment process), I haven't done a detailed calculation but I am assuming at least a few thousand dollars

CR: 😭😭

Are you doing any audits or taking steps to make sure code is safe?

JD: There is very minimal new code introduced (and is quite simple), I have had some fellow farmers take a look and have been reviewing for some time but ultimately will recommend participants to proceed with caution (as they always should) until it is more publicly vetted.


[This part of the interview is from today]

CR: Wanted to get your comment on this tweet:


banteg @bantg“We have written independent Solidity code that interacts with Curve’s contracts essentially as an on-chain API via delegation. Any reused software in Swerve is MIT licensed.” LOL if true11:13 AM ∙ Sep 4, 202081Likes3Retweets

Not sure where that quote is coming from, but is that how Swerve works?

JD: Yes, that quote is accurate and from us. That is how the contracts work, and why I say there was minimal code changes 😊

We essentially use their own contracts on chain as an API via DELEGATECALLS, one could argue it was more of we built a Curve on top of Curve vs. a fork of Curve, hah


CR: When will it be launched?

JD: I may release the website page sometime tomorrow and be able to give fellow participants a day or so heads up about the deployment.

Website page will just be a holding page, not the actual application and contracts won't be deployed until it has been announced at least a bit ahead of time to give everyone equal opportunity to review and decide if they want to participate. The actual Swerve application will be hosted on IPFS.

CR: When you say fellow participants, is that people you have already told about the project and want to become Lps?

JD: They are just some internet chat room friends I have made over the years, to the best of my knowledge they do not have any secret wealth 😊 they are pretty average crypto users like myself.

CR: Is this the first defi project you've built?

JD: I have some software and crypto experience but this is my first public project!

CR: To wrap up my questions, want to get at the larger topic of forking DeFi protocols. is there a danger of creating this race to zero in fees, and team earnings and token holdings, that in the end, there just aren't enough incentives for people to build in the first place? some might say it's a little naive to expect token holders to always decide to reward the founders and teams behind the projects, and instead that they'll just look to maximize their own short term benefits.

JD: I do not see it as a danger, I see it as an opportunity for the ecosystem to begin the process of protocol price discovery. Today, most protocols are not launched with fair distributions. No amount of software is worth most of the allocations we see kept today. Yearn validated to me that if you build a healthy and strong community, your community will ensure its self sustaining. Those that seek short term and guaranteed riches will not build healthy or successful ecosystems.

I do not see protocols primary development being gate kept by the founding engineers in the future, instead I see a Yearn style community succeeding. Eventually, incentives will run out, and the strongest ecosystem will survive. I think if the team wishes to have tokens or extract value, they can use the protocol like any other user and earn them fairly like everyone else. This is the power of Ethereum, people should be building open and fair systems. The incentive to build open source projects should be wanting something to exist. But I am just a simple farmer and understand that many may not agree 😊

CR: So why the name? I guess it's how you take a curve right? haha

JD: ! you get it
few understand

The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year or 70 Dai/year, while free signups get only part of the content.

About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.