No sooner had Sushi found its footing after a crazy year when it happened again — drama.
A governance proposal by Jared Grey, the No. 5 decentralized exchange’s new head chef, has divided the community as its members vote on Monday.
In a move designed to replenish Sushi’s coffers, Grey wants to divert all transaction fees distributed to xSUSHI stakers to Sushi’s treasury for one year. Sushi’s treasury currently collects 10% of trading fees.
The Sushi treasury would accumulate revenue in the form of 50% ETH and 50% USDC and try to collect $6M in new revenues during 2023. xSUSHI stakers would still receive governance voting rights under the proposal, which is named Kanpai. But they would not earn the share of trading fees they currently enjoy.
“Sushiswap apparently in some hot water financially,” Barry Fried, a DeFi influencer, tweeted in response to the proposal. “With $SUSHI reaching max tkn supply, (thus [liquidity mining] incentives dwindling), CEO is calling for 100% of fee revs to be streamlined to treasury.”
On Sushi’s governance forum, head chef Grey warned that more financial runway is needed to ensure that the project can continue operating until the team designs new tokenomics for the project. Grey estimated that Sushi’s current treasury would enable the project to continue operating for about 18 months.
“The situation requires immediate action to ensure sufficient resources for uninterrupted operation,” Grey said. “Kanpai is a temporary solution to a long-term problem, and a new tokenomics proposal is on the horizon, which will help address the long-term value proposition of Sushi for stakeholders.”
Some members weren’t having it. “Depriving xSUSHI holders of the fees they are entitled to is a breach of primary covenant before the community,” Graine, a community member, responded.
“No one is depriving anyone. It’s an agreement to redirect the fees to save the project,” Grey replied.
But some members believe that diverting xSUSHI revenue away from stakers could be even more disastrous for Sushi’s financial health.
“If they vote yes, xSUSHI holders [are] gonna unstake and sell,” a Sushi community member told The Defiant. “Price decline will mean this sorry mess leads to a net loss for [the] treasury. Fees for a year from Kanpai will be less than the current treasury pile loses because of SUSHI’s price. Utter madness.”
Almost 60% of votes have been cast in support of the proposal. If passed, the measure would be in place for one year or until new tokenomics are designed and launched, which the Sushi team is targeting for the end of 2023.
MarkOKW of Golden Tree, one of Sushi’s largest investors, voted in support of the proposal, but asked that the core team facilitate more opportunities for debate among the community and provide greater clarity on how the measures may be reassessed in the future.
“For example, we believe there should be a strict cutoff for diverting yield at 6 months, and any further extension would require a vote,” he posted. “We also would like to see clarity around a potential reassessment of this proposal if new tokenomics are planned to be implemented within the next 12 months.”
Grey’s claims that Sushi may not survive without diverting xSUSHI fees to its treasury attracted scrutiny of the project’s financial management.
Meanwhile, Sushi published information on Dec. 7 detailing Sushi’s salaries and operational expenses. The data shows that 15 core team members will receive a combined $4.3M in annual remuneration, accounting for 82% of its yearly budget.
Artem K, also known as Banteg, a core contributor to Yearn Finance, shared data showing that salaries have increased by more than 10% compared to the previous year. The move is in contrast to many web3 projects that tightened their budgets and laid off staff in response to the 2022 downturn.
On Dec. 6, Neil Bhasin of Sushi’s compensation committee posted that Sushi’s treasury currently comprises 12.3M SUSHI, and 200,000 USDC. With SUSHI trading at $0.99, Sushi only has enough funds on-hand to support its current operating expenses for two years.
One Sushi community member told The Defiant that the information provided by Grey does provide a complete picture of the project’s spending.
“The budgets don’t even cover any professional fees, marketing budgets, or costs for the constant caravan of conferences,” they said. “The hotels, flights, and expenses are paid by Sushi.”
Adding to the contentiousness of the proposal, it initially included 20,000 SUSHI bonuses for around half a dozen devs that worked on Shoyu, Sushi’s long-awaited NFT marketplace, despite the marketplace failing to materialize so far. After a revision on Dec, 14, that provision was eliminated.
Grey said Shoyu was excluded from the revised financials as the project will be moved to the Sushi Studios arm and have its own budget. He said it will not be possible for Sushi to fund Shoyu’s operational costs once it is live.
As for Kanpai, Grey said it’s crucial for Sushi’s future. “The proposal helps maintain the financial health and viability of the project,” he said on Discord. “If it fails, the community runs the very real risk of severely handicapping Sushi.”