The high-risk environment around the decentralized finance space and hype for one of its latest offerings, SushiSwap, raises an analogy with a Japanese delicacy called fugu, or pufferfish, which is said to be more deadly than cyanide.
Highly trained chefs have been serving up fugu in Japan’s top restaurants for decades, balancing the lives of their customers on the edges of their Yanagiba knives. Any slight error could fatally poison the diner. As such, the cryptocurrency community now also has a proverbial fugu of the DeFi world.
In a short space of time, the carbon copy of the popular Uniswap automated market maker surged in use due to its lucrative yield farming numbers and accounted for over 70% of the total value on Uniswap at the beginning of September. SushiSwap was officially launched on Aug. 28. However, the self-proclaimed “chef” of Sushiswap, an anonymous figure known as Chef Nomi on Twitter, has seemingly served up a batch of poisonous fugu to SushiSwap token holders and users after swapping out all of his Sushi tokens for Ether (ETH) on Sept. 5.
As the cryptocurrency community cried foul over the situation, with widespread talk of Chef Nomi having carried out an exit scam, the “chef” attempted to redeem himself by handing the project over on Sept. 6 to a well-respected industry leader: CEO of the cryptocurrency derivatives exchange FTX, Sam Bankman-Fried.
Handing power back to the community
Cointelegraph reached out to Bankman-Fried to ascertain how he had become involved in the SushiSwap project and what the next steps for the platform would be following its original creator’s apparently self-imposed exile. Bankman-Fried is also the CEO of Alameda Research, which has two trading accounts that have reportedly been listed in the top 10 for lifetime profits of over $60 million, according to a Bloomberg report. The FTX CEO told Cointelegraph that he made contact with Chef Nomi and the project’s general manager OxMaki, testing the waters of a potential collaboration between the projects:
“I first approached Nomi and Maki about potential collaboration opportunities after the project had been running for a while; the conversations were interesting but nothing too much happened, because in the end it’s the communities’ decision.”
Bankman-Fried was one of many industry participants that has taken a keen interest in the DeFi space, which has exploded in popularity and capitalization in 2020. Various projects have seen billions of dollars of capital, both cryptocurrency and fiat, locked into different DeFi protocols, and many more may be drawn in by the impressive yield farming returns.
At the beginning of September, Uniswap crossed the $1 billion mark in its 24-hour trading volume. The numbers being posted put Uniswap third on the list of exchanges by normalized trade volume, trailing behind centralized exchange behemoths Binance and OKEx. SushiSwap launched and is currently operating on the Uniswap exchange, and the huge yields touted by the platform quickly saw DeFi enthusiasts stake Ether in exchange for Sushi tokens, locking in an enormous amount of value in SushiSwap’s liquidity pools on Uniswap.
It didn’t take more than a week for the total amount of funds staked through SushiSwap to account for more than 70% of the total value locked into the Uniswap protocol. Bankman-Fried believes the platform still has immense value to offer in the DeFi space:
“I thought Sushiswap was really innovative, and had a compelling pitch (before the Nomi incident). It’s hard for me to predict the future here; a lot depends on the community.”
Following Chef Nomi’s now-infamous token swap, Bankman-Fried admitted that he was initially hesitant to take over, but had a gut feeling that it was “the right thing to do for the project.”
The wider cryptocurrency community was appalled by the behavior of SushiSwap’s anonymous creator, with many labelling his Sushi/ETH token swap as an exit scam. Chef Nomi made off with 17,971 ETH after swapping out 2,558,644 Sushi tokens on Sept. 5, as was originally detected on Twitter by Spencer Noon, head of DTC Capital:
— Spencer Noon (@spencernoon) September 5, 2020
A second token swap on Etherscan for a further 20,039 ETH took place, taking the total tally of swapped ETH tokens to 38,011 ETH, worth just under $13 million at the time of writing. These tokens reportedly came out of the project’s developer pool, and were intended to fund the ongoing development and maintenance of the platform.
As the platform looks to carry out a migration to a multisignature contract, Bankman-Fried would like to see Chef Nomi return the funds that he cashed out of the project: “I would certainly like him to return at least a large portion of them to the dev pool! I think he handled it really poorly and communicated really badly.”
SushiSwap migration from Uniswap due soon
The SushiSwap platform has already had its fair share of controversy in its incredibly short lifespan. While Chef Nomi dumping Sushi tokens caught the cryptocurrency community off guard, the platform had grabbed headlines earlier for its plans to migrate from the Uniswap DEX. On Sept. 4, the SushiSwap community voted in favor of a migration away from Uniswap to its own native platform, taking $180 million worth of Sushi tokens with it.
Regardless of the feelings of the wider crypto community or the actions taken by the “chef,” the migration of the SushiSwap platform is expected to take place on Sept. 9, as confirmed by Bankman-Fried:
“Sushiswap is currently undergoing migration and transition to multisig; after that, it’ll be community-run, not run by me. I’ve mostly just been working to ensure a smooth transition to multisig and a smooth migration.”