Can DeFi projects avoid getting cloned and dying?


IDEO Managing Director and
Crypto startup investor Ian Lee have revealed how DeFi protocols can avoid
being cloned and drained of liquidity. This can be done by improving its design
and governance from the start.
SushiSwap forked from Uniswap on
Friday, August 28. This suggested the beginning of a wave of similarly cloned
DeFi protocols due to their open-source natures. These projects take years of
research and development. They undergo several security audits and attract
millions in seed funding. But they can be cloned with little or no recourse.
This is a crypto risk.
By improving tokenomics and
governance design, the protocol becomes more valuable. It integrates into
existing DeFi platforms and pre-planning upgrades to introduce better
functionality and rewards. They will then roll them straight out when a fork
appears. This could also make existing protocols more resilient, going forward.
It will also increase investments in digital currency.
Nowadays, yield farmers want
better rewards. They need a native token that increases in value over time and
protocol improvements that keep the platform ahead of the competition. You can
help ensure the longevity of your project by giving them that.
It is timely advice. This is
because SushiSwap has managed to leach over a billion dollars in crypto
collateral from Uniswap in just five days. This has been done by giving yield
farmers better rewards. In this case, it is protocol ownership through SUSHI
governance tokens, which have also surged in price.
Uniswap was vulnerable because
it does not have its governance token yet. It only offers a share of the 0.3%
trading fee to its liquidity providers. According to the Sushiboard analytics platform, over 73% of Uniswap’s TVL (total value
locked) has moved over to SushiSwap.
Another significant difference
is that Uniswap raised a significant amount of capital from VCs in a funding
round. Whereas SushiSwap offers rewards to its community owners. For future
DeFi protocols, the venture capital funding model may need to be revised.
DeFi protocols have come under the limelight as theDeFi space has grown by leaps and bounds this year.
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Crypto Business World
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INDIA