DeFi Forks Are Moving Beyond Copy and Paste

DeFi Forks Are Moving Beyond Copy and Paste

October 1, 2020 Decentralized Finance DeFi 0


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DeFi Forks Are Moving Beyond Copy and Paste

By Danger Zhang

In the last month, almost every major DeFi project has been forked. Some of the forks have even been forked themselves. But do these near-copies of projects actually add any value? Or are they simply opportunistic money-grabs?

Like many things in life, the truth isn’t always clear-cut. Each fork, from SushiSwap, to Swerve, to Cream, has its own unique value proposition – or lack thereof. While they originally started off as pure copy-and-paste clones, forks are growing ever more sophisticated. Along with incentivized community participation, these early experiments show forks are moving on from their shallow roots, into something more.


Uniswap – SushiSwap

SushiSwap was the first major fork of a DeFi project. Announced on August 27th, Sushiswap was based on Uniswap but added a token and governance system. By supplying liquidity to one of several incentivized liquidity pools, users were able to earn $SUSHI governance tokens. The goal was to execute a vampire mining attack – using a token incentive to drain liquidity from Uniswap to its own protocol.

This simple incentive scheme was extremely effective. In the first week of launching its website, SushiSwap achieved over $800M of liquidity – even more than Uniswap itself. It was able to migrate this over to its own platform, and since more liquidity equals lower slippage, equivalent trades on SushiSwap were even better than its parent.

Did SushiSwap’s “vampire mining” hurt its parent? Surprisingly, no. Based on, we can see that both liquidity and volume on Uniswap were significantly higher after the SushiSwap migration than before it. It seems that the attention and new users Sushiswap brought may, in fact, have benefited Uniswap as well.

Ironically, SushiSwap itself experienced a series of forks. From Kimchi, to Sashimi, a cornucopia of food farms arose soon after Sushiswap’s launch. As Sushi rewards dropped off, liquidity was incentivized to move away to these forks. But most of these forks didn’t add much, if any, innovation, and quickly died off.

SushiSwap on the other hand has held up fairly well, despite some drama along the way. Even after Uniswap launched its own token and mining rewards, SushiSwap still has over $400M of liquidity at the time of writing. Since Sushiswap incentivizes different pairs than Uniswap, it also provides better rates than Uniswap for several pairs, such as YFI-ETH or LEND-ETH. Still, after the boom of the initial migration, both liquidity and volume are sliding.

Can SushiSwap recover? SushiSwap’s Snapshot governance page is quite active, with a new lending platform proposed to be included under the Sushi umbrella. Recently, Sushiswap also added a new UI and a rotating set of yield farms. If innovations like these as well as improvements to the protocol continue, along with good governance decisions, the SushiSwap story may be far from over.