Is the fair launch of DeFi really “fair”? (www.blockcast.cc)

Article source: cryptobriefing

Compilation: Fenbushi Capital

Fair startup is currently the hottest trend in DeFi, but the lack of consistent incentives may mean that the industry is trading for short-term benefits at the cost of real innovation.

Who is fair to?

It’s hard to believe that Sushi was launched a month ago. This Uniswap fork project has an accelerated boom-bust cycle, which is accompanied by a lot of controversy, drama and twists and turns.

But the biggest impact that Sushi has brought to the industry is to make the concept of “fair start” popular .

Uniswap raised $11 million from a well-known venture capital fund, but the community scoffed at it. There are individuals who believe too much in the spirit of decentralization and believe that all protocols should comply with the rules of large-scale public distribution of tokens.

Because Sushi provides about 90% of its tokens to liquidity providers, community members (Uniswap) are very attracted for this. They turned to scorn Uniswap because they raised funds but postponed the release of coins.

The reason for their contempt is simple: Uniswap’s refusal to issue coins is a greedy behavior . The distribution of tokens allows members of the DeFi community to share the dividends of the agreement.

Others believe that it would be even more greedy to ask a team that started from scratch and made Uniswap a successful project share (Uniswap has become a potential killer for Coinbase).

In the end, Uniswap began to turn the tide in two situations.

First, SushiSwap’s “Developer Fund” eventually became the personal retirement fund of Chef Nomi (the founder of Sushi Exchange). If it were not for public outrage, the anonymous founder might have left with funds dedicated to upgrading the sushi exchange.

Second, Uniswap finally launched a token, and its issuance rules are fairer than most blue chip DeFi agreements. However, this fair start will curb the development of the incentive system.

If one person makes $14 million in a week because of the results of two years of hard work by others, then which developer will spare no effort to develop new things?

The truth about fair start

Of course there are some exceptions, and Cream seems to be an exception. This project is a compound fork project, but the project has established itself to a certain extent by adding some new features.

Compared with Compound, Cream borrowed more assets, completed a new interest rate model, and returned the fees obtained through the agreement to users (Compound does not). This proves that this fork project seems feasible. Although it utilizes the underlying code of Compound, it adds new functions to it.

But most projects that start fairly have the same goal: to profit from investor greed. It is undeniable that because encryption technology is in a bull market, many users are pursuing high profits instead of real innovation.

However, the darkest aspect of fair startups is that they may have an adverse effect on developers .

Imagine the founder of a new top DeFi protocol. They spent the last two years of their lives pouring blood, sweat and tears into their products. But because of the so-called decentralization and transparency, the founder was forced to open source all the code.

In terms of tokens, they issue 60% of tokens to the community through liquidity mining rewards. The founder sells 20% of the tokens to investors, and this part of the money is used for recruiting employees and development, testing, auditing, marketing and operating expenses. The remaining tokens will be distributed to the founders and core team.

One month after the mainnet went live, various businesses ran smoothly until an anonymous Internet role forked the protocol. In addition, the anonymous person clamored that it is unfair to give the community only 60%. Instead, this fork project issued 95% of the tokens to the community, while keeping 3% of the tokens as inventory and 2% for itself.

The community praised this anonymous person as a “true” pioneer of decentralization and unselfishness. These people seem to have overlooked that there is a world of difference between using 2% of tokens to fork the code and playing marketing games, and spending years of hard work and effort to keep the 20% reward.

Calculated with a market value of 50 million US dollars, these two projects are equivalent to one working week earning 1 million US dollars, and the other working for many years to earn 10 million US dollars. Needless to say, the $10 million does not include the costs incurred in starting and running the project.

Innovation is more valuable than money

Fair start shows the message: that founders should not raise funds from investors to start a business, because for some reason, it is unfair to do so.

In fact, there is nothing wrong with forking a protocol and building new ones on top of it. At the very least, the move helped test new versions of the same agreement and gauge market demand for such services.

However, this kind of fork, which allocates more resources to the public without making any changes, is useless except to make a few users richer.

If DeFi users turn to these so-called fair startup platforms to make quick money, it may cause developers to escape the ecosystem on a large scale. Without the contributions of developers, the DeFi ecosystem will face greater problems .