The Vampire Takes a Bite
When SushiSwap burst onto the scene, it raised eyebrows and suspicions. Dubbed a ‘vampire mining attack’, the newly launched decentralized exchange (DEX) caught many off guard. Its launch strategy seemed like a slick heist straight out of a Hollywood script, as it lured in liquidity from Uniswap, the reigning champion of DEX.
SushiSwap’s Incentive Strategy
On August 28, SushiSwap announced its plans, offering creamy rewards in the form of SUSHI tokens to liquidity providers willing to jump ship. Users who provided liquidity to select Uniswap pools could snag SUSHI tokens as they made the leap to the new platform. This tactic pulled in a staggering $800 million in liquidity by September 9, leaving Uniswap with a paltry $400 million in total value locked. Talk about a dramatic takeover!
The Unexpected Allies
But am I alone in saying that the plot twists just keep on coming? Despite being initially pegged as the villain, SushiSwap’s problematic launch seems to have inadvertently helped Uniswap fill its coffers. According to Flipside Crypto, many of the new liquidity entrants during this turbulence were fresh faces eager to get their hands on both SUSHI and UNI tokens. The DEX’s attempt at competition pushed Uniswap to innovate.
The Ripple Effect
Initially, liquidity providers made a beeline to SushiSwap, dazzled by SUSHI’s early performance. Alas, Chef Nomi’s infamous ‘rug pull’ — cashing out $14 million worth of his own token — led many to think twice. During the maelstrom, Uniswap launched its own UNI token shortly after, brilliantly capturing any liquidity that had been feeling anxious on the SushiSwap ship. It’s either a spectacular comeback or an epic case of revenge!
Uniswap’s Post-Sushi Comeback
With UNI’s launch on September 16, a tidal wave of liquidity flooded back into Uniswap, propelling its total value locked from $786 million to a jaw-dropping $2.09 billion — a 165% growth. Meanwhile, SushiSwap was left treading water, with its own total value locked taking a nosedive from $754 million down to $402 million. Oops, someone might be swimming with the fishes…
What the Future Holds
Even though the CEO of FTX, Sam Bankman-Fried, swooped in to save SushiSwap after Chef Nomi returned the funds, cracks in the DEX’s foundation became glaringly obvious. As SUSHI’s price plummeted from its high of $9.85 on September 1 down to $1.24 soon after, confidence in SushiSwap continued to wane, while UNI trudged along at approximately $4.34 — down from a record high but infinitely less turbulent. Token governance isn’t exactly known for holding onto market value, so who knows where that fishy business will lead?
Conclusion: The Liquidity Paradox
So, could the launch of SushiSwap be a mixed blessing for its predecessor? The evidence points to yes! While it aimed to siphon liquidity, it may have actually forced Uniswap to adapt, innovate, and bring in a fresh wave of users. In the world of DeFi, who’s the real winner here?
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