DeFi wars are more about healthy rivalry rather than just liquidity warfare. There’s no stopping the current DeFi explosion as crypto investors lap up anything that comes out of the DeFi realm. No wonder competition is heating up, and DeFi wars are just getting started. Uniswap and Sushiswap are two biggest names who are slogging it out for the crown.
Blockchain-based applications are transparent and decentralized by nature. Conceptually, investors and users know what is going on as all the processes are transparent and credible. However, open-source projects can be forked or updated simply by bringing about minute changes in the source code.
DeFi wars are just beginning to heat up
Rivalries can stem amongst companies operating in a limited arena and serving limited users. As DeFi achieves new growth milestones, projects now have credible revenue streams with a strong user-base and product portfolio. As protocol wars heat up, the community benefits from increased competition as more services are on offer by the rivals. Any new player can enter the market by merely forking a new code.
DeFi wars began in August 2020 when some unknown developers launched Sushiswap by undertaking minor tweaks in the Uniswap model. The new platform offered everything that Uniswap did and then some. A $Sushi token brought the zing factor. As if $Sushi token isn’t enticing enough, liquidity providers were offered exciting incentives and rewards. No wonder Sushiswap quickly gained ground to grab Uniswap’s user base and gain control of even more liquidity.
The benefits include enhanced trade execution, increased trading volume, and more market participants. Currently, Uniswap makes around one million dollars daily in fees alone. In response, Sushiswap brought ‘Yield Farming’ to the arena, offering an improved token-distribution system. In the process, the platform gained liquidity
How liquidity warfare actually works
Liquidity in the form of ETH is made available to many Uniswap pools. The liquidity share of every user is represented by ‘Uniswap-LP-Pool-Tokens.’ The share is deposited in a Sushiswap contract, to create $Sushi tokens which are supplied on a pro-rata basis.
User liquidity is connected directly via $Sushi tokens to the platform. Smart contracts are staked, and converted into $Sushi, thereby tapping into Uniswap pooled assets. Thus, Uniswap liquidity is gradually taken into Sushiswap.
Approximately $2 billion worth of ‘Uniswap-LP-Pool-Tokens’ have become part of Sushiswap. Subsequently, $Sushi rewards for developers has been staggering as staking in Sushiswap yielded 1000 percent APY. Consequently, SUSHI token prices have gone through the roof as the market cap touches $300 million.
Sushiswap emerges from shadows – Not a clone anymore
With a burgeoning user base, Sushiswap has become a full-fledged ecosystem. There are many integrations and collaborations in the pipeline as it looks set to expand its outreach. Uniswap’s $UNI governance token signifies that the market leader views the former as a legit threat.
DeFi wars are shaping, just like the early days of Bitcoin, Ethereum, and Bitcoin Cash. However, in this case, the applications can be termed forks. As superior products emerge out of established players, the DeFi wars are likely to bring more benefits to the investors.