SushiSwap’s $60M strategic fundraising round has come under fire from community members who dislike the plan to offer investors deep discounts at a time when its tokens are slumping in the marketplace.
Last week, the SushiSwap team introduced a proposal to diversify the protocol’s treasury. The decentralized exchange holds the bulk of its treasury funds in the form of its native SUSHI tokens and the proposal forms part of its overall Treasury Diversification Plan.
Under the proposal, the protocol plans to raise $50M from a slate of venture capitalists and other institutional investors, with an additional $10M reserved for community members who wish to participate. The investors will receive SUSHI tokens at a 20 to 30% discount to the average price over the last 30 days. The tokens will be vested over eighteen months with a six month cliff.
SushiSwap community members were quick to show their disapproval in the project’s governance forum. Many long-term SUSHI holders took umbrage that the proposed deal discount would unfairly disadvantage those unable or unwilling to participate.
The size of the deal also drew criticism because it would involve divesting a substantial portion of the SUSHI tokens held in the treasury. Many wondered why such a large capital raise would be needed when the protocol’s operating expenses are currently less than $1M per year.
UMA Steps In
As it became clear that one of the community’s primary concerns was selling SUSHI tokens below their perceived fair value, the team from UMA Protocol, a platform for building customized synthetic assets and derivatives, stepped in with a novel plan.
The UMA proposal would allow SushiSwap to lock its native tokens as collateral instead of selling them, with no risk of liquidation. Range tokens are analogous to convertible debt. They allow the SushiSwap treasury to effectively borrow funds now and determine a preset price to sell its tokens at expiry in six months.
Deal Likely To Be Revised
In response to community concerns, SushiSwap project lead 0xMaki set up a series of polls earlier today to gauge the community’s preferences with regards to the size and terms of the deal. Not surprisingly, the responses were overwhelmingly in favour of a smaller deal with fewer investors and a much longer vesting period. 0xMaki later posted that the deal would likely be scaled down to $15-20M in line with the community’s wishes.
Coming on the back of the controversy surrounding Uniswap’s DeFi Education Fund, it seems only natural that DeFi token holders will be paying more attention to proposals involving treasury funds, and that’s probably a good thing.