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21 January 2021

Lex Sokolin: Principles for Acquiring DeFi Projects - CoinDesk

Lex Sokolin: Principles for Acquiring DeFi Projects - CoinDesk


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You pay $1 million USD equivalent for $10 million in treasury assets and profit.

There have been some signs from regulators, however, that a token changes nature over the course of its lifecycle.

It also helps that issuing governance tokens for a DAO creates market capitalizations and enterprise value for token holders.

The main DeFi players of 2020 each have $100+ million or more in the market cap of their instantiated tokens.

This has accrued from various distribution mechanisms that embedded financial assets as rewards for financial use.

According to Messari data, Uniswap and Aave are at $900 million, Yearn at $800 million, Maker at $560 million, Synthetix at $530 million, Compound at $470 million, Balancer at $100 million and Curve at $95 million.

The fork is called Pickle Finance and has between $100 and $400 million in assets.

The recent news is that Pickle is going to be merging with Yearn.

Given that the technical architecture is quite similar, and the experience of the developers is comparable, the core part of the merger is on-boarding Pickle developers to work on Yearn.

This implies the Pickle protocol converges its path and community back to Yearn, and that Pickle-specific features will be an addition to, rather than a differentiator against, Yearn.

If the incentives from Yearn cash flows are much higher than the incentives from Pickle cash flows, a lagging protocol can’t last long in an adversarial environment.

Notably, the governance tokens for Yearn had limited input on this “transaction” – in part because governance is not clearly, legally articulated, and in part because the transaction did not involve the sale and purchase of assets.

But what actually holds “value” are (1) the communities that commit assets to protocols, and choose to align economic activity with some particular brand and (2) the entrepreneurs that have the very rare skill-set of building and securing such protocols.

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