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The Sushiswap Token Sale proposal has been challenged by the community and may become
Regardless of the final outcome of the proposal, Sushiswap's token offer has become one of the most discussed in the crypto community, with community members pressing the project to revise the details of their proposal and prospective VCs publicly stating their ideas and strategic values to appeal to the community. Or will become one of the most classic cases in the history of DEFI governance.

The author | Gong Quan yu

On July 8, Sushiswap co-founder 0xMaki published a proposal in the Official Governance Forum as part of the Vaults diversification plan, suggesting that a portion of the approximately 51 million Sushi currently held by Sushiswap Vaults could be sold to institutional investors up to $60 million, The offer price is 20-30% of the time-weighted average price of the 30 days prior to the close of the proposal, and the vesting terms are a 6-month lock-up period and an 18-month linear release period.

Token sale price setting

Currently, Sushiswap Vaults holds the majority of Sushi's assets, worth more than $300 million, and the proposal aims to diversify the Vaults' assets and strengthen strategic partnerships with crypto VCs.

The proposal also reveals that, Acconfirmed strategic investors include Lightspeed Venture Partners, Spartan, Dragonfly Capital, Polychain,, and Pantera Capital, 3AC, Defiance, Parafi, Hashed, Multicoin Capital, CoinFund, CMS Holding and other 21 institutions.

But since then, the Sushi token's recent poor performance and the details of its sale have caused a huge amount of skepticism and continued to simmer in the Sushiswap community, with more than 80% of the responses opposing the proposal.

In response, a number of crypto VCs, including Lightspeed Ventures, Pantera Capital, and Defiance Capital, posted comments below the proposal to explain their disbelief. Many non-direct participants, including FTX founder SBF, Arca Capital partner, UMA protocol developer, also participated in the discussion.

So far, the number of responses to the proposal on the Sushiswap governance forum has reached 201, making it the most discussed proposal in the history of the project. Specific to the controversy caused by this proposal, it can be summarized into five points.

One of the doubts is that Sushiswap, which has ample cash in its coffers and annual operating expenses of less than $1 million, does not need a token sale on such a scale. "Sushi should not raise money and start a diversification plan now that its revenues are sufficient to cover all operating expenses for the time being. With Defi regaining strong traction from the public market valuation, Sushi fundamentals continue to increase and the new agreement is upgraded and running smoothly," wrote "Greeneyes." We can sell small amounts of tokens many times on the way up, or even just start diversifying and using the vaults internally."

On this topic, 0xMaki stated that the main purpose of the token sale is to create more strategic partnerships, saying that these partners can act as advocates for their portfolios, pushing unissued projects to be launched on Miso and basically integrated with the Sushi ecosystem.

A second concern is that the 20-30% discount is too high, further hurting Sushi owners at a time when Sushi prices have slumped recently. Jeff Dorman, a partner at Arca Capital, said Sushi was trading below its fair value and now was definitely not the time to sell.

"Demand for Sushi tokens is clearly strong given the vibrant community, project fundamentals and the large number of 'strategic' investors who have expressed interest in raising capital. If investors are so bullish about Sushiswap's future, they should buy Sushi, forgo the discount and add the claimed 'strategic value'." Jeff Dorman said.

Franklin Bi, director of portfolio development at Pantera Capital, said that if the Sushi team sold all the Sushi they planned to sell on Dex at market prices, there would be about a 30% slippage effect. The deal gives the team immediate liquidity of $60 million at a 20-30% discount, with a 2-year restriction period, so the discount is still fair.

However, many members of the Sushiswap community were not convinced by this response, as the Sushi /ETH transaction that Franklin BI actually exemplified represented only a small portion of Sushi's overall liquidity and was therefore not representative or convincing.

A third point of contention is that the linear unlock period of nearly 2 years is still too short, and if they believe in Sushi's long-term potential, they should have set a longer unlock period. According to a poll by 0xMaki, 60 percent of the community agreed that there should be a four-year period for unlocking.

Source: Sushiswap Governance Forum

In addition, several community members have suggested that tokens should be sold in the form of options, which allow VCs to unlock their Sushi tokens only if the Sushi price reaches a certain price. SBF also tweeted that he thought selling at market price + increasing the 5-year 1-to-1 option with a strike price of $12 was the right move.

UMA has also proposed a new Token financing solution, Success Token, which combines the project's own tokens with a call option on the project's tokens. This means that the project party is offering a call option to the investor instead of offering a discount to sell the tokens. The part of the call option becomes valuable only if the project's token price rises, creating a more rational incentive structure: investors receive their "bonuses" only if the project performs well.

A fourth challenge is that the sheer number of VCs involved in the deal doesn't actually provide enough strategic value, or that the strategic value and value-added services they offer are similar. User "Klemperer-the-Goat" pointed out that "adding 21 funds is absurd if the purpose of the sale is for strategic partners rather than to raise money. Many of these funds also know each other and are well-known cryptocurrency-focused funds, is it really true that each of them brings different value added from the other?"

Most of the community members were skeptical and said that 3-5 major VCs would be enough to participate, and that anyone willing to be involved should publicly state the strategic value and specific contributions they could bring to Sushi before making the final choice. "I would ask every investor to commit to writing at least one public post/tweet etc every quarter for the next four years: a) updating Sushi for the general audience and b) a list of things they are doing/helping." "SBF tweeted.

In the comments below the proposal post, a number of VCs echoed the sentiment. For example, Amy Wu, a partner at Lightspeed Partners, responded that Sushi is one of the top teams in Defi's industry from a product, vision and execution point of view and therefore wants to build a long term relationship with the Sushi team and community. The agency can introduce the Sushi team and community to various fintech products, new banks, expand Sushi's network outside the crypto industry, as well as help Sushi with recruitment, PR, marketing, BD, etc.

Franklin Bi, Director of Portfolio Development at Pantera Capital, explained the organization's history and philosophy in the response post and said it could help Sushi with hiring, portfolio/industry connectivity, technology/market research, marketing, resources/suppliers, etc.

The Future Fund responded that it was an early investor in Sushiswap and had bought the domain name as a gift to the project.

The fifth challenge is that some of the VCs listed in the proposal are even hurting the Sush community. According to Etherscan data, 3AC and Defiance have sold nearly a million Sushi on Dex and Minance in recent days while planning to participate in the transaction, and are not eligible to be strategic supporters of Sushi. "It looks more like a carry trade than a strategic long-term investment." Jeff Dorman says.

Source: Etherscan

Wangarian, a partner at Defiance Capital, responded that Defiance was an early backer of Sushi and one of the largest Sushi holders today, but as a crypto investment fund with liquid positions, "Our job requires us not only to buy tokens, We don't see a need to explain every action we take to the public."

Wangarian also said Defiance will not participate in the financing to address any conflict of interest concerns. "We hope that the Sushi community recognizes the benefits of having a large stablecoin denominated vault, which will provide the Sushiswap team with meaningful financial firepower in the years to come."

In addition to the above questions, the fact that the Defi Education Fund received 1 million UNI votes from the Uniswap community but was quickly sold off a few days ago also caused some Sushiswap users to reflect on their concerns that VCs are abusing governance for their own benefit.

"After UNI education fund, we got the offer in such a short time. I want to say this is not a coincidence, venture capital funds realized they can abuse of governance for their own purpose. Just open a governance proposals and make it look legitimate, and VC can use their huge SUSHI position will every vote vote for them." "There is no mechanism to ensure that a VC actually does what they promise," wrote "Wunderbernd." They can get a Sushi at a discount and not actually be forced to do anything.

It's again similar to the DEFI education fund, they get the money, they can do whatever they want."

On July 16, 0xMaki responded in a proposal post that it would reduce the size of the deal from $60 million to $15 - $20 million based on the overall response from the community, and that it had initiated several votes on the details of the token sale.

"It's rare to see this level of interaction between institutions and community governance, and key moments in how these institutions interact with DAOs through open discussion." 0xMaki also commented on the significance of the event.

Perhaps due to community activity, Sushi token prices rose as high as about 16 percent today, to $7.04 at press time, despite a broader market pulsating, but are still down about 68 percent from this year's high.

As the debate over the proposal continues to ferment, Hayden Adams, founder of Uniswap, Robert Leshner, founder of Compound, Andre Cronje, founder of YFI, Ryan Selkis, founder of Messari, and Ari, founder of BlockTower Capital Paul and a number of other industry luminaries have been tweeting about it.

Regardless of the outcome of the proposal, Sushiswap's token sale proposal has become one of the most discussed in the crypto community, with community members pressing the project to revise the details of its proposal and the venture capital firms involved publicly presenting their ideas and strategic values to appeal to the community. Or will become one of the most classic cases in the history of DEFI governance.

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