The Uniswap platform, the foremost decentralized cryptocurrency exchange (DEX for short), is breaking records again and again. In the meantime, some developers are trying to take advantage of this gold rush and adapt their projects to include a governance token. Thus, we have seen the SushiSwap, Kimchiswap and Hotdogswap projects emerge.
The latter allows users to deposit tokens from Uniswap’s cash pools to earn a portion of the protocol fee as well as accumulate the governance token.
While SushiSwap has managed to raise $1.7 billion in its liquidity pools, not all of them have such a bright future. For example, Hotdogswap’s HOTDOG token was launched on September 2. Unfortunately, the lack of available liquidity has led to insane volatility in the Uniswap ETH/HOTDOG pair.
Within minutes, the token went from zero to over $1,000. At 4:00 pm, the token was valued at approximately $8,000 before dropping back down to $4,000. And that’s when the magic happened. In less than 5 minutes, the price had collapsed to zero.
The newer projects enjoying the DeFi craze are very appealing and offer an incredible return on investment but these crazy highs will most certainly have brutal falls to settle into something more sustainable. DeFi is an exciting side of crypto technology and the concept of a lot of these projects is very solid. The growth of the sector, however, isn’t. It’s not a criticism, it’s an observation anyone can make by looking at graphs such as the one right above.
Indeed, in crypto as in any investment, it is always better to know what you are investing in and what happens to your money: in this case, with some DeFi projects, the apparent complexity of even a priori viable projects (such as yEarn and its YFI token) should rather prompt caution. So what about much more dubious projects, such as those that make up this new trend in culinary-themed cryptocurrency? As always, do your own research before investing.