Two whale holders have championed a proposal to channel all fees generated by the SushiSwap decentralized exchange (DEX) into the protocol’s treasury.
About two weeks ago, SushiSwap’s Head Chef Jared Grey proposed increasing the payout ratio of Kanpai from 10% to 100%. According to him, the operational expenses of the DEX amounts to around $5 million per year, and the DAO’s treasury currently provides just 1.5 years of runway. He argued that the “significant deficit in the treasury threatens Sushi’s operational viability, requiring an immediate remedy.” Consequently, Grey noted that there was an urgent need to increase the amount diverted to the treasury from fees (Kanpai) to 100% for “one year or until new tokenomics are implemented.”
A playing field for whales
Voting on the proposal closed yesterday, with approximately 59% of the voting power rallying behind the idea. Interestingly, two whale holders were largely responsible for pushing the proposal. The digital investment arm of venture capital outfit Golden Tree, GoldenChain, and a wallet with ties to crypto trading firm Cumberland were the two whale holders.
Together, they accounted for 10 million sushipowah tokens (the DAO’s governance token). Their combined voting power represented 91% of the 11 million tokens that were cast in support of the proposal.
On the opposing end, approximately 41% of the votes, representing 7.5 million sushipowah tokens, were against the idea. 85% of the total votes cast in this category came from just three wallets that contributed 2.9 million, 2.4 million, and 1.1 million sushipowah tokens, respectively.
In general, these five whale holders controlled a whopping 88.5% of all the votes, meaning that less than 15% of the remaining voting power came from 774 wallets, albeit with infinitesimal influence.
Stakers and holders to bear the brunt
The recently passed proposal comes at a cost to SUSHI stakers and holders. Stakers, who typically earn rewards from trading and protocol fees for locking their tokens, may no longer be compensated for the next year. According to Grey, using SUSHI tokens to fund expenses wasn’t a feasible plan.
However, as previously stated, Sushi is currently near full distribution of its token supply and has yet to capitalize on opportunities to diversify its Treasury and provide the necessary liquidity for ongoing operations.
A controversial proposal?
Several members of the DAO have voiced their disapproval of the move on the Sushi DAO forum. As already mentioned, once implemented, users who stake their SUSHI tokens will not receive any reward. Notably, some users have raised concerns over the fact that whales like GoldenChain were able to dictate the outcome of the poll. However, in its defense, GoldenChain said the move was necessary to ensure the project’s long-term stability.
We (GoldenChain/GoldenTree) will vote yes on the signal vote for Kanpai, as we believe it is necessary to provide for the long-term stability of the Sushi protocol. That being said, we believe the implementation of this proposal needs to be significantly clarified before going to a final vote.