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Within a few short days, the Uniswap protocol saw its TVL (Total Value Locked) collapse to the benefit of SushiSwap. Going from $0 to $1.34 billion in locked-in value, SushiSwap simply repossessed its big brother’s cash.
This news lays the foundations for a reflection on the ethical nature of such processes and allows us to understand the counterparts of open-source protocols. Indeed, before their fall, Uniswap reigned supreme in the decentralized exchange sector, after having raised the equivalent of 11 million euros from the a16z fund.
After 2 years of hard work, the team behind Uniswap is suffering the full implications of an open economy. It took only 5 days and a few motivated coders to create a perfect copy/paste of its platform. The only major difference? The integration of a governance token that offers an additional speculative tool.
Goodbye research and development efforts, astronomical audit expenses, and consequent marketing efforts! A fraction of a second was enough for SushiSwap to wipe out two years of work. This debacle is far from being an isolated case. Curve has also just been the victim (to a lesser extent) of being upstaged by Swerve Finance.
The launch of a future Uniswap token is now on the table, with a V3 expected to be on the horizon by the end of the year. However, it will take much more than a token to reverse the trend. Unlike its SushiSwap competition, Uniswap must satisfy a horde of institutional investors, which is a major handicap in terms of fair distribution.
So what does this mean for future DeFi projects going forward?
Initially, the issuance of a governance token will be mandatory to improve the speculative potential for individuals. The token will have to be introduced on an equal basis, forcing developers to find ingenious alternatives to pay for auditing and development costs.
The speed with which forks will be established will increase. The responsiveness of human capital will become essential to nip any hostile takeover attempt in the bud.
The capital raised will be scrutinized with particular attention. The mismanagement that characterized the ICO period is over. It will be impossible to be competitive with carbon copies if production costs involve too significant financial compensation with third parties.
All in all, this might prove to be a good thing for the consumer as very easily an imperfect product will be replaced in the blink of an eye by a superior copycat.