Answer to SushiSwap's Troubles May Be Transforming into On-Chain DAO
A proposal to move SushiSwap governance on-chain is imminent.
By: Owen Fernau •DeFi News
SushiSwap has been whipsawed by busted deals and the departures of key leaders. And yet the decentralized exchange remains one of DeFi’s second-largest DEX by trading volume and now, a coalition of of other projects is rallying to get behind it.
A Snapshot proposal, based on a post from Sushi’s forums, is imminent, according to its author, Justin Bram of Ondo Finance, a protocol that bills itself as a decentralized investment bank. Ondo’s co-founder Nathan Allman authored the proposed changes. The proposal calls for another group of projects putting their collective weight behind Sushi to turn the project into a multi-chain DeFi force.
The proposal, called Poke Bowl, would formalize Sushi as an on-chain DAO, which means voting will trigger smart contracts to execute and establish a legal entity for the project. The move would take assets like the protocol’s Twitter and Discord accounts off-chain. Both entities would be governed by SUSHI holders, according to the forum post, which preceded the Snapshot proposal.
“Something needs to be done to salvage sushi before it’s too late,” tweeted Michael Dempsey, general partner, at Compound, an investment firm, in response to Ondo’s proposal. “As long as team hierarchy is solved with clear leadership, I think this is a great proposal that aligns with where in the ecosystem Sushi fits, as a core piece of multichain DeFi infrastructure.”
There may be emotional motivation behind the proposal too: “I think we all have a soft spot for Sushi,” Bram told The Defiant.
Sushiswap’s Snapshot has more than 22,000 members, good for the fourth most and ahead of behemoths like UniSwap and OlympusDAO.
“We all have a soft spot for Sushi.”
Sushi has had its fair share of chaos in the last six months. 0xMaki, the protocol’s co-founder, stepped down in September to take on an advisory role. Joseph Delong, Sushi’s former CTO, left the DAO amidst swirling controversy regarding the protocol’s direction.
Just weeks ago, a solution appeared to be at hand: Frog Nation, a collective of protocols headed up by Daniele Sesta, was primed to form a deep partnership with Sushi. The plan was for Sesta and his crew to create an ecosystem that included Sushi, the now-beleaguered Wonderland, Abracadabra and other projects which make up Frog Nation.
After a failed merger with Frog Nation, signs of trouble have continued to kick out from Sushi. Most recently, governance has had to vote to get back admin control of the project’s Discord, which Delong had control of.
Now Ondo has kicked off their own efforts to support the protocol with the decentralized investment bank aiming to leverage its own specialities which include a product which breaks Sushi liquidity provider (LP) positions into different tranches of risk and return. If this service is adopted by Sushi, more investors may be attracted to increased customizability of the decentralized exchange’s options.
Ondo will also tokenize those tranches, meaning that users will be able to trade those tranched positions on Sushi, as well as borrow against them on Kashi, Sushi’s lending product.
Under the proposal, Sushi would also integrate Ondo’s liquidity as a service (LaaS) product into its interface. Ondo essentially matches stablecoin providers like Fei Protocol which provide their stablecoin with other projects which provide the native token. The stablecoin providers get a consistent 5% return on their tokens, while the partner projects get liquidity on their token without needing to provide liquidity mining incentives.
Bram sees this service being integrated with Sushi’s frontend.
As a part of Poke Bowl, Ondo raised a $15M stablecoin fund from Frax and others to pay developers and contributors over a four year period were the proposal to move forward.
The question remains, however, whether the proposal is coming too soon.
“The hesitation and sensitivity to what’s happening with the Ondo thing is, it wasn’t consulted with the community and was rushed up on the forum. We’ve had that a few weeks back and it’s not the way to do it,” Mountain Goat, a pseudonymous Sushi community who has been with since its vampire attack inception, told The Defiant. Mountain Goat called the Frog Nation a “governance attack,” rather than a mutual partnership.
The Poke Bowl post received significant pushback in the comments section. “I think Sushi is not in dire need of new partnerships or takeovers right now,” said Boring Crypto, on a Discord server called “Sushi Road Ahead.”
The developer also posted a poll asking whether the community wanted to hand Sushi over to Ondo which received 49 votes, 96% of which informally voted against the proposal.
Bram disagreed with the framing of the question on the forum.
Despite Mountain Goat, Boring Crypto, and others’ reluctance to rush into new integrations with projects, Bram is still pushing forward and actively engaging in the “Sushi Road Ahead” Discord server.
“We believe it’s important for the community to vote and we want to see where stakeholders are aligned,” he said on the server. “We will 100% respect the will of the voters and will be here to help no matter what.”
The details of Poke Bowl involve making changes to the voting process. “In the puritan definition, Sushi isn’t really a DAO because all of the governance happens off-chain,” Bram said. “So all the votes they do are Snapshot signalling votes but no code actually gets executed from those Snapshot votes.” Only two people can currently approve the Snapshot votes, according to Bram, who would like to further decentralize the process.
Bram also believes Ondo can help Sushi with hiring, saying that over roughly the last three months, about half of the protocol’s developers have left. “They’re kind of at a critical point where losing more would be devastating.” The $15M stablecoin fund would be used to aid with hiring and retention.
“We want to take care of them, they’re doing amazing work,” Bram said of Sushi’s developers.
Mountain Goat sees Sushi’s current hiring situation as rosier. “We’re a DAO with lots of money,” he told The Defiant. “We can hire the best brains in the world to assist us on these decisions if we want to,” Mountain Goat said of the overall proposal.
The community member thinks Sushi has the potential to return to its glory days after the failed Frog Nation partnership.
In all, it’s undeniable that Sushi attracts an amount of passion rarely seen in the DeFi space. Whether the proposal passes or not, the protocol will likely continue to have people throwing their weight behind it. “This community was built on controversy,” Mountain Goat said, referring to the infamous vampire attack on Uniswap. “We’ve got tough stomachs.”