SushiSwap Incurred a $30M Loss for Incentivizing Liquidity Providers During the Bearish Crypto Year
SushiSwap chief executive Jared Grey regretted the incentives advanced to liquidity providers in a year considered the coldest crypto winter. Grey indicated that the incentives translated to a $30M loss. He admitted the need for SushiSwap to reconsider restructuring its business model to yield higher fees and swap volumes.
SushiSwap Loss was Inevitable
The tweet by Grey regretted the $30M loss incurred by the decentralized exchange (DeX) for relying on the token-based emission approach to incentivize liquidity providers when the crypto industry confronted a contagious meltdown. Grey’s tweet noted that continued reliance on the token-based strategy proved unsustainable.
Grey announced that the DEX platform had initiated a Flipside that featured dashboards showing annual performance. Grey dismissed the current strategy by declaring change as inevitable. He illustrated that SushiSwap would realign its tokenomics approach to terminate subsidies extended to liquidity providers relative to the emissions.
Redesigning Model to Eliminate Flaws
Grey is considering redesigning the SushiSwap model that has previously prioritized bootstrapping liquidity on its exchange. He added that SushiSwap was redesigning its tokenomics by the first quarter of 2023 to prioritize total value locked (TVL). The DEX executive indicated that individuals should embrace Sushi as liquidity providers realize profitable swaps.
Grey restated his commitment to the Kanpai governance proposal aimed at diverting the protocol earnings from the charges as rewards from stakeholders. The proposal targets to convert the rewards into SushiSwap treasury. The proposal echoes previous Grey disclosures that SushiSwap has 18 months left for its runway.
Benefits Attained from Kanpai Governance
The DEX head indicated that Kanpai offered a temporary solution that enabled SushiSwap to rebuild its cash reserves. Grey plans to offer competitive compensation and purchase critical infrastructure. Similarly, it will help diversify its treasury using funds from paired asset bases, including stablecoins and Ethereum (ETH).
Grey refrained from disclosing the new design though he promised to observe financial transparency. Also, he indicated launching the public dashboards for treasury and DAO activities in the first quarter of 2023.
Grey reaffirmed the commitment to honor the disclosure promised to the community during AMAs., Sushi Discord and interview calls. He confirmed the community would access the official whitepaper by the end of this year.
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