Victor Ugochukwu · Dec 14, 2020 . 5min read
How have major DeFi fork projects faired so far?
Before you think of forking a successful DeFi project, do you have the community to sustain the tempo?
By Victor Ugochukwu · Sep 8, 2020 . 14min read
Recent growth in the DeFi sector has sparked off the race to create either similar but slightly different project or outright forks. If you want to see the spate of the horror happening presently, go to Uniswap. A horrific number of tokens are being listed there daily, many of which are scams. After all, anyone without recourse to KYC rigour can list their token on it. And almost instantly, these tokens can start attracting liquidity.
With a stark resemblance to the ICO days, DeFi growth in 2020 couldn’t have been easily predicted even by a crystal ball gazer. From year-to-date, DeFi has grown from a mere $661 million to over $7.8 billion in Total Value Locked – TVL. This is a whopping 1,082% growth, not counting several other DeFi projects like Sushiswap, DFI Money and many others.
But many of these DeFi projects are outright forks which offer little or no difference from their clone. How have the major DeFi forks faired really? Let’s look at a few of them. From DFI Money, a yEarn Finance’s clone to YAM Finance, Ampleforth’s clone and then Sushiswap, a brazen clone of Uniswap.
DFI Money, yEarn Finance DeFi project fork
DFI. Money (YFII) forked away from yEarn Finance (YFI), after yEarn Improvement Proposal #8 (YIP-8). The proposal was put forward by the community to prolong the minting of the platform utility token YFI by another two months and with a weekly-halving emission curve but was rejected. This led to the community in support of the proposal forking YFI. Since then, YFII has been listed by top exchanges like Binance, OKEx, Huobi etc. Compare it to YFI budding ecosystem, YFII is still yet to match its predecessor’s growth. For instance, the recent yETH vault launch by yEarn Finance was a community member’s idea and not originally Andre Cronje’s. Since yETH vault launch, more than $76 million have been deposited and $19.6 million debt drawn. This represents about 389% collateral value for the yETH vault. This shows the huge community yEarn has gotten within a very short time.
Even if you decide to compare TVL for both YFI and YFII, the former still leads. As of the time of writing, YFI has $769 million TVL as compared to $150 million in YFII pool 1. Clearly, YFI has a strong community backing to be pushing forth with these figures. What is the benefit of DeFi forks if the community isn’t going to rally round the new project?
Also, checking their valuation in market cap, YFII is valued at $131 million compared to YFI at $671 million. However, the fact that DFI Money can fork off and still keep moving is a good sign that it has positioned itself well as the YFI of the East. A good selling point, I must say.
YAM, a clone of Ampleforth
YAM Finance modelled itself as a newer version of Ampleforth, which is a cryptocurrency protocol with an elastic supply that can expand and contract based on market demand. Ampleforth, on the other hand, is backed by notable VC investors. Funds including Pantera Capital, Arrington XRP Capital, Slow Ventures, and Coinbase CEO Brian Armstrong, raising $9.8 million. However, YAM attempted a rather different route. The Ampleforth DeFi project fork launched with no pre-mine, no founder shares, no VC interests.
Even though YAM took the galloping DeFi craze to another level then by amassing as much as $600 million in TVL, it crashed abruptly after a rebase bug was found in its codes. The bottom line was that YAM led the way to many other DeFi projects we will see later launching with unaudited codes and crashing after one bug or the other is found.
Even though YAM appeared to be a successful DeFi fork initially, its crash brings a salient thought to one’s mind. And this is: It is easy to fork a code but not a community.
Sushiswap forked Uniswap codebase sparking off a liquidity war.
Sushiswap made the news recently. And this time around, it was not about it trying to eclipse Uniswap into oblivion like it claims to be out to do. It was about its anonymous founder; Chef Nomi accused of exit scam because he sold off a massive amount of SUSHI token. While Chef Nomi accused Uniswap of acquiring VC funding and the popular talking points most DeFi forks adopt, it quickly forgot that Uniswap built its solution from the ground up and in the process amassed a strong community base.
Sushiswap is a Uniswap clone that comes with the allure of a governance token. While Uniswap version currently distributes only transaction fees to liquidity providers, Sushiswap adds the shiny SUSHI governance token to the mix. Within just a few days of launch, it smashed over $1 billion in TVL in its unaudited contract.
The SUSHI token quickly rose to over $10 while centralized exchanges like Binance, OKEx, Huobi scrambled to list it to get a taste of its explosive liquidity.
But as we can see, even with the vampire mining Sushiswap staged over Uniswap, the DEX unicorn benefitted indirectly as its TVL shot over the roof. Within days of Sushiswap allowing deposits into its liquidity pools on Uniswap, the latter hit over $1 billion TVL. As at the time of writing, Uniswap is presently sitting at number one spot on DeFi Pulse.
Right now, the fight is on to keep Sushiswap alive as Sam Bankman-Fried becomes the new face of the project. SUSHI dumped hard on exchanges on the news of a possible exit scam. But the main thing to take note is this: Uniswap is waxing stronger. The DEX unicorn has not even launched its version 3 yet. The next version comes with a governance token to attract more liquidity providers.
The real catch is not the protocol fork but the army of the community behind the DeFi project.
Before the yETH vault launched, the hype was palpable within the horde of yEarn Finance supporters, from Anthony Sassano to Ryan Adams, to DeFi Dad and many others. These guys constantly “shilled” the then-upcoming yETH vault which quickly saw massive deposits upon launch. There’s no doubt in the kind of huge support yEarn Finance enjoys. Whether this is a calculated marketing effort or not is not the question, the project has been creatively exploring new paths.
So, before you think of forking a successful DeFi project, do you have the community to sustain the tempo? This is a question anyone thinking of toeing that path should consider answering first.
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