A new recipe for SushiSwap – Launched in August 2020, SushiSwap is one of the leading decentralized exchange platforms. Deployed through 14 blockchains, the application accounts for a total volume of 225 billion dollars in cryptocurrencies. However, after two years of good and loyal service, the community wishes to undertake a restructuring of the economic model of the protocol. This will also impact the SUSHI token.
The Meiji Restoration and the Separation of Powers on SushiSwap
On August 3, three members of the community SushiSwap@ControlCplusControlV, @levx.io and @Cookies submitted a proposal on the protocol governance forum.
Title “Meiji Restoration” it takes the example of Japanese history to introduce a change in the policy of SushiSwap.
“This proposal aims to usher in a new era for Sushi. An era led by a reinvigorated DAO. An era where the SUSHI token reclaims its place as one of the most productive assets. »
This proposal follows an observation: DeFi has long thought that the price of tokens and governance should be linked.
Thus, the Meiji Restoration is an evolution which aims to separate these two elements. This offers a new CADhonest and healthy, and new mechanics to ensure the “economic success of the SUSHI token”.
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The DAO Meiji: the new governance of SushiSwap
As a first step, this proposal seeks reform the DAO which currently controls the SushiSwap protocol.
This new DAO will take advantage of its past mistakes to offer a new, more effective formula. This will start from a premise: token-based governance has repeatedly shown its weaknesses.
Besides governance attacks, these protocols are inevitably controlled by the larger holders of the governance token. A major problem for a governance that wants to be decentralized.
Initially, the Meiji DAO would be a fully on-chain organization. This implies that the Sushi protocol and its governance will be able to run without permission and without the approval of a centralized organization.
“The fact that the Meiji DAO is based on smart contracts also enables many exciting new possibilities, such as the ability for Sushi to sign smart contracts with other DAOs, own cash and take out loans from organizations. like Ava. »
As a second step, the Meiji DAO would transition from a voting system where 1 SUSHI equals one vote, to a “vested-escrow” voting system. This model, notably operated by Curve Finance or Balancer, offers users to block their tokens to participate in governance. This also reduces the influence of the whales during the votes.
Restructuring of the SUSHI token
The second major modification of this proposal introduces a modification of the Sushi token and its issuance mechanics.
Thus, as we have just seen, the protocol would switch to a “vested-escrow” voting model. In addition, Sushi would integrate the principle of Gauges (gauges) used by Curve Finance.
“ The gauges seek to address a fundamental problem right now: the lack of engagement of governance token holders. […] Gauges ensure that value flows to entities that are aligned with the long-term success of the protocol. »
In practice, the protocol would end the xSushi program which allowed the staking of its Sushi tokens in exchange for the new tokens issued by the protocol. Indeed, this system generated a selling pressure on the token, considered as unsustainable for the ecosystem.
oSUSHI and gauges
“ It is similar to veCRV in the Curve ecosystem, however we will use the name oSUSHI instead of veSUSHI. To receive oSushi, you must block your SUSHI for a period of one month to 4 years. The longer the period and the more SUSHI you deposit, the more oSUSHI you receive. However, all your SUSHI will be locked in the contract until the end of the lock period you have chosen. »
Note that oSUSHI are not transferable tokens, and it will not be possible to buy or sell them. They will be specific to each user who has deposited SUSHI tokens in the dedicated module.
oSUSHI holders will be asked to vote for the weights of each of the gauges. In practice, this means that they will decide the weight of each of the pools in the protocol. The higher the weight of a pool, the more the liquidity providers of this pool will receive issued SUSHI as well as the fees collected by the protocol.
Obviously, this vote will also be motivated. Indeed, the bribes contract will reward voters with additional SUSHI tokens.
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A proposal acclaimed by the community
So far, this proposal has met with a positive reception from the community. Thus, the preliminary vote currently leans in favor of “for”.
This preliminary vote will allow the proposal to evolve in a community manner, until its final vote via the governance module.
For its part, the protocol developer team also seems enthusiastic about the idea of this restructuring. JiroOnoa software engineer from Sushi, said he still wanted to do more research on this proposal.
“I want to do a little more research for this proposal. Overall, I really like the direction and think it’s a good way to make the incentives sustainable. However, I want to check that there is enough incentive for people to take part in governance via this new model. »
This restructuring could take place in the Sushi 2.0 roadmap. Indeed, the developers have been working for several months on a new version of the protocol.
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