The decentralized finance (DeFi) craze is far from over, even after weeks of copy-cat projects and a number of unfortunate “rug pulls” (scams). A new decentralized exchange protocol launched just recently, which is incentivizing use through a new token, has locked up over $250 million worth of value within its first 24 hours in existence.
Audits are underway but many in the Ethereum and broader crypto community see this as a sign of how “degen” DeFi users truly are.
What is SushiSwap?
It makes sense why the pseudonymous developers behind the project, which includes one “Chef Nomi,” would want to do copy Uniswap. The OG decentralized exchange has become a powerhouse, processing over 100,000 transactions each day and facilitating as much value transfers as some medium-sized centralized exchanges.
The key difference between Uniswap and Sushiswap is that the former has no crypto and the latter does. Fittingly named SUSHI, the coin was created to incentivize liquidity to migrate from Uniswap to SushiSwap. SUSHI also provides its holders with dividends — 0.05 percent of every transaction made on the exchange.
“With that, we have designed SushiSwap as the next step forward in the Uniswap protocol design: an evolution. Taking Uniswap’s elegant core design, we’ve added community-oriented features that we believe help improve the design of the protocol, as well as provide further benefits to the actors involved,” the SushiSwap team wrote in regards to the purpose of this fork.
The developers have also added a governance function, which is different than Uniswap, which is centrally controlled by a company and its investors at the moment.
$250 million worth of Ethereum, stablecoins, & more locked in the protocol
Although the term “SushiSwap” was only first mentioned days ago and the protocol’s contracts only went live on Ethereum on the morning of Aug. 28, the exchange has already garnered much traction.
According to Ethereum dashboard Zippo, the contract that yields SUSHI by depositing Uniswap liquidity has $300 million worth of cryptocurrency locked up in the contract. This $300 million sum is mostly made up of Tether, USD Coin, Ethereum, and DAI.
What’s notable about $300 million is that this figure was grabbed literally 24 hours after the protocol was launched. What’s more, the SushiSwap contracts technically haven’t been audited by any notable programmers in the Ethereum space.
Importantly, leading smart contract auditor QuantStamp is purportedly working on an audit right now, though nothing has been published about that just yet.
There were and still are some fears on Twitter that there was a backdoor in the contract that would allow the smart contract operators to steal the $300 million locked in the contract.
Spencer Noon, head of DTC Capital, expressed his concerns when he wrote the following shortly after the launch of SushiSwap:
“SushiSwap TVL might be the best DeFi greed and stupidity index we have. It’s the purest indicator for how much money degens are willing to light on fire.”
SushiSwap TVL might be the best DeFi greed and stupidity index we have. It’s the purest indicator for how much money degens are willing to light on fire.
— Spencer Noon (@spencernoon) August 28, 2020
What’s interesting, though, is that the founder of Synthetix found that a wallet affiliated with the leading crypto exchange FTX deposited some capital into SushiSwap, potentially verifying that the contract is OK to use:
“Really interesting dynamic here with @SBF_Alameda going full degen yield farming. Just eyeballing the account it seems like at one point between 20-30% of the entire AUM of Sushi was coming from an account associated with @FTX_Official.”