Liquidation Scares, Sushi's Restructure, & Reminiscences of a Crypto Cowboy

MAY 03, 2022 • 7 Min Read

Joo Kian + 2 others

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN LUNA, ASTROPORT, AND MARS PROTOCOL. MEMBERS OF OUR TEAM HOLD FTM. DELPHI LABS HAS INCUBATED BOTH ASTROPORT AND MARS PROTOCOL. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Chart of The Day: Liquidation Fears Impact Fantom

  • Over the weekend, FTM was one of the tokens that underwent a significant drawdown, experiencing a -26.5% in price in the past 7 days.
  • In part, this was due to large positions facing liquidation calls on Scream, a money market platform on Fantom. A whale with ~$45M of FTM collateral was being liquidated and is currently down to $14M in FTM collateral.
  • This particular user over-levered their FTM positions and bought $SOLID and $DEUS with their loans. These tokens were then locked up for 4 years in their respective protocols. This prevented the whale from having any liquidity to manage their loans on Scream.
  • As the user’s positions got liquidated by liquidation bots, gas prices on Fantom experienced a large spike—averaging at 3.8k Gwei, the highest it has ever reached. Fear spread amongst Fantom Chain users as these large liquidation events have the ability to congest the chain as bots compete for liquidations. This spurred users to move their tokens off-chain onto CEXes or bridge it off Fantom before such an event occurs.
  • As whales get liquidated, it’ll likely cause a large drawdown in price that could cascade into larger liquidation events. Users of money market platforms are advised to manage their levered positions responsibly to avoid liquidations.
  • For more on Liquidations, Delphi members can see our Delphi Pro Report about the different designs of Money Markets here.

The Official GNO Burn and BitDAO Buybacks

[Excerpt from May. 3rd DAO Insights]

  • Alchemix passed two proposals last week.
    • AIP-45 Strategic Fund: This proposal permitted the core team to purchase up to 500k in illiquid strategic assets. Illiquid assets are those that the team deems necessary for the DAO, but due to their low liquidity are prone to front running and price manipulation. As such, this process allows the team to purchase these assets prior to a vote.
    • AIP-46 Liquid Lockers: This proposal authorizes the DAO to purchase $6.15m sdCRV, swap 500k ALCX for SDT, and max lock their SDT into veSDT.
  • Astroport has voted to add ASTRO emissions to their MARS/UST pool.
  • Floor DAO held three votes last week.
    • Mintlist Raffle FRWC: This vote allowed users to have their address added to a raffle for the upcoming Forgotten Runes Warrior mint.
    • FIP-13 Remove MAYC Liquidity: This proposal allowed the team to temporarily remove MAYC liquidity for the upcoming Ape DAO land sale. Liquidity will be re-added post-sale.
    • FIP-14 Partnership with REDACTED: This proposal establishes a partnership between themselves and [REDACTED]. Floor DAO is pursuing this because [REDACTED]’s product, Pirex, should allow seamless bribes for gFLOOR holders.
  • Mars Protocol has voted to increase caps for the LUNA-UST (5m to 20m) and MIR-UST (2m to 3m) strategies.

Forum Spotlight

  • Sushi Restructure
  • Synopsis: Sushi received a restructuring proposal from JiroOno. The proposed restructuring has three components, each of which the community will need to approve through governance. The first component asks for 6m SUSHI, vesting over four years, for current and future contributor compensation. The second item proposes creating a compensation committee. The committee would be responsible for all aspects of compensation management. The committee will negotiate rates, track KPIs, establish responsibilities, and review performance. Thirdly, and probably most challenging, is a leadership search. With the dramatic loss of its previous leadership team and the crumbling of the Frog Nation proposal, Sushi has identified the need to find new leadership. The proposed search will be an extensive undertaking as the proposal allows any community member to nominate themselves.
  • Pro Arguments: An informal poll in the forum shows that 89% favor this proposal. Existing team and community members are broadly favorable as well. As this proposal comes from the team, it probably addresses the nuances and needs of Sushi better than an outside proposal.
  • Con Arguments: The community seems broadly supportive based on the informal poll. However, this proposal has touched a nerve for some, and the community has raised concerns about the proposal. One user, Graine, points out that this earmarks half the treasury for a non-binding promise from the team. Graine also points out that the proposal is light on accountability and transparency. A Flipside Crypto representative agreed on the lack of transparency, and even supportive users asked for more. Other users had qualms about the lack of process and highlighted the potential conflict of interest in the compensation committee. However, a proposed committee member did provide some answers. The thread evolved into a debate around the process and makeup of the compensation committee. The original proposal only recommended two individuals, and how the proposer chose them was not clear. Although, based on their response, one committee member seems to have an extensive pedigree. GoldenNaim attempted a compromise by recommending adding a third community seat to the committee.
  • Our Position: Given the history of Sushi, we think this is a needed proposal, but we also think the forum pushback is unsurprising. The current Sushi team has gone above and beyond in their efforts to keep the protocol together through their recent chaos. They have shown how capable they are, and their budget request is reasonable. The steps they have laid out are obvious and achievable and would benefit Sushi as a whole. However, the history of Sushi is laden with community concerns around communication between the team and token holders. The forum is full of threads with community members voicing similar concerns in the past. The drama surrounding the loss of their CTO can be attributed to the lack of communication between the team and the community. Even the collapse of the Frog Nation deal was caused by many of the same issues. The community concerns around communication and committee processes are well-founded. But to the credit of JiroOno and Neiltbe, they answered those concerns well. We think that if the Sushi team listens to the community on this proposal and reworks it to alleviate their concerns, this proposal stands a good chance of succeeding, and the community will compensate the Sushi team well.
  • For more, Delphi members can see the latest DAO Insights here.

Tyler Reynolds: Reminiscences of a Crypto Cowboy

[Excerpt from a Delphi Podcast]

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Joo Kian + 2 others