The rise, fall, and rise of Sushiswap
“… we have designed SushiSwap as the next step forward in the Uniswap protocol design. 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.”
These words marked the birth of Sushiswap. This coin followed in the footsteps of other YFI clones with its low supply and yield farming. When it was listed on Uniswap on August 26, it started at a high of $128 before finding a bottom at $0.69. In less than a week of its launch, it had been listed on Binance peaking at $15.96. On CoinMarketCap, it hit rank 74.
This article will take you through the roller-coaster week we had with Sushiswap, with a near rug pull that almost collapsed the DeFi space, a turnaround with more community involvement, an apology, and the spawning of more forks and clones.
The rise
Sushiswap launched on August 28th and hit $150 million in Total Value Locked (TVL) after only a day. 3 days later on the 1st of September, it was listed on two of the most reputable exchanges in the space, Binance, and FTX. On the 3rd of September, its contract had been audited by Quantstamp and a day later the TVL of Liquidity Provider (LP) tokens hit $1.8 billion. It seemed the only way was up for $SUSHI until the unexpected happened.
The fall
The drama began when Chef Nomi, the anonymous dev behind Sushiswap removed his liquidity from the SUSHI/ETH pool and sold it for ETH.
He made away with approximately $14 Million in ETH. He defended this sale saying he cashed out to focus on building.
This event led to a more than 50% fall in price. The price could have gone down further if not for exorbitant gas prices. There’s also the fact that some community members saw no wrong in what Chef Nomi did, and saw no need to sell their tokens. Doing so would have crashed the token price.
Following this drop, Uniswap’s TVL dropped by over 35%.
Chef Nomi tried justifying it saying, if Charlie(Lee) could do it, then he can. That is indeed true, but the difference is Charlie didn’t sell his $LTC tokens after a week of its existence.
The crypto community then turned their attention to the centralized exchanges that rushed to list $SUSHI, notable of which was Binance
Considering how long it takes genuine projects to get listed on Binance, Sushiswap took 5 days after its launch to get listed on the centralized exchange. Binance is the largest exchange in existence at the moment and getting listed on there is an indication of how good a project is for a lot of traders.
There were claims that Chef Nomi was the CTO of Band Protocol, a Binance listed project. Probably it was this association that got it listed so quickly, with Binance itself forgetting to keep its customers' safety first. Who did the background check and missed this from the lead dev that he was not going to have his tokens vested.
Indeed, those who claim that Binance listed these coins without the necessary background checks just to remain relevant and earn from the DeFi craze were vindicated in this instance when CZ Binance came out with this revelation.
Many predicted this would beat the record set by the FTX Leveraged Tokens as the quickest delisting, but there was another twist in store.
The rise
Sam Bankman-Fried of Alameda Research stepped in offering to lead the new Sushiswap since he was directly invested in it. FTX was one of the first centralized exchanges to list Sushiswap. He offered a way forward for $SUSHI, asking that Chef Nomi first give up control of Sushiswap immediately to keep the project alive. In addition, he offered to build Sushiswap on Serum, another Alameda product. In addition, he would personally return 5 million $SUSHI back to the community, equivalent to the amount that Chef Nomi sold from the dev pool.
The crypto community reacted well with the assurance that Sam and the FTX team would be the new team handling it. Price shot up over 100%.
Interested members of the crypto community who wanted to be a multi-sig holder expressed their interest and a final team was selected after votes from the community.
Then came the migration.
How the migration worked
Sushiswap is a fork of Uniswap. All they did was copy the Uniswap code and introduce the $SUSHI token to reward liquidity providers and eventually draw them away from Uniswap. LPs were supposed to deposit their Uniswap tokens in the DEX. Then they would swap the Uniswap LP tokens for SUSHI which would mean that the Uniswap liquidity would now become Sushiswap liquidity.
The migration was a success and Sushiswap managed to move over $1.3 billion in liquidity pools. With the new exchange live, staking $SUSHI could earn you 0.05% of fees from all Sushiswap trades. Also, 2 million $SUSHI was airdropped to people who held on during the migration. With the existence of Sushiswap now, Uniswap’s TVL has continued to drop.
The buyback
On September 11, Chef Nomi returned following the successful migration, apologizing for causing harm to the community and offering to give back the amount he earned from selling his tokens.
Some may argue that it’s enough to send the money back, but they ignore the money that could have been made by him from trading $SUSHI on the margin market. Coincidentally, Binance enabled Isolated Margin trading for $SUSHI on the same day he pulled the heist on his own token. Who’s to say he did not short before removing liquidity?
Regardless of all these permutations, this news caused the token to pump with the community thinking that this was a sign that the worst was over for the Sushiswap telenovela. But that was far from true. The buyback did happen with $14 million, but for many investors, it didn’t have the desired effect. It could be a reflection of the current market, but $SUSHI price fell, again, with some jokingly asking if there was indeed a buyback or did Chef Nomi sell more tokens. Was the recovery just a dead cat bounce, or will the token reclaim its lost glory in a more favorable market? Nevertheless, this sole action of a greedy dev almost crippled the DeFi space with skeptics pulling out a long list of why DeFi is not the future of blockchain.
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