📺SotN #31: The Rise of SushiSwap with 0xMaki

welcome everyone to another episode of state of the nation david how are you doing today absolutely fantastic i think we have a pretty interesting state of the nation ahead of us 0x mackie from sushi swap this will be the first uh non-uh pseudo-anonymous camera off state of the nation that we've ever had at least with a guest our cameras are obviously on but our guest xerox mackie he's on standby with his camera off because he's pseudo-anonymous and that's kind of how the sushi swap protocol rolls so we're going to get a little bit more into that later this is

going to be a super fascinating episode i think you're going to learn a lot if this is your first day of the nation these come out every tuesday we try to live stream them on youtube then we put the video up then we get the podcast out to our podcast listeners so this is an opportunity for us to relate some of the interesting things that are going on in the bankless nation to big picture stuff uh we're going to be getting to that zero x maki conversation in just a minute but david we've got some new stuff going on in the bankless nation as well we had a fantastic episode with justin

drake that just came out this past monday i think it was our most bullish ethereum episode yet i was maybe bold to say but because because the topic was cryptography what what were some of your takeaways from this episode yeah justin drake this was a unique piece of uh a unique podcast to come out of the bankless podcast that i think might be my favorite episode that we've ever done so far it's also our longest it's a marathon at two hours and 20 minutes uh and well i think what makes this uh episode so unique was that

justin drake who is an ethereum researcher by the way he works with the ef he's a he's a cryptographer uh came to us with this proposal for like what he thought would be a really really cool episode and he was totally right uh he the idea came to him when he heard us do this like bull case for ethereum bowl case for each series that we did you know with eric connor anthony zazano dc investor and then we had the guys at youth capital on uh and then justin drake wanted to introduce like what we what he calls moon math the bold case for cryptography uh and i think my biggest takeaway just

as a little teaser for what's in that episode everyone should totally listen to it is what i'm now calling drake's razor uh where drake has uh justin drake has two rules of thumb that he lives by that i think this whole entire industry is pinned on whereas if you can use cryptography use cryptography but if you can't use cryptography use cryptoeconomics and this is of course in relation to building something building an app on top of ethereum or actually creating a consensus protocol like ethereum itself if you're in the protocol or anything else in this cryptocurrency industry use cryptography

if you can but if you can't you can use cryptoeconomics and i think that's going to be a very valuable tool very relevant to the protocol steam thesis and something that's really a really strong mental model that i got out of that episode yeah and i was just so struck by how far we've yet to come on the cryptography front like this is basically um this moon math that you're talking about is basically moore's law for crypto and we're just at the very start of this trajectory of uh crypto innovation crypto uh cryptography innovation really

and that's going to make all of our blockchain systems that much better we also have yanov from the graph who's coming on an ama community ask me anything this thursday 12 o'clock eastern so check that out and jeremy alaire our conversation with the ceo of circle he is one of the uh main leaders of usdc the staplecoin he came on the podcast that conversation is coming out monday any takeaways from jeremy alaira david jeremy elaire is uh has been at the

forefront of what has been an extremely active quarter of crypto regulation right uh you know originally people always thought that like bitcoin is going to be the target of crypto regulation but bitcoin seems to be kind of getting a pass and what actually seems to be the target of crypto regulation has been stable coins crypto dollars and primarily usdc we saw this with this stable act but then we also saw this with uh fincen's guidance on self-hosted wallets that is very relevant to stable coins and so jeremy alaire as the the founder behind the the usdc crypto dollar has uh had to take

the brunt of this like regulatory at this highly active regulatory environment as it relates to the our industry um so we we mainly get that perspective out of jeremy but then of course we also talk about uscc inside of d5 which was a very fun conversation so stay tuned for that one coming out next to monday jeremy is bullish defy he's bullish ethereum guys you can hear all about our after the podcast conversation as well david we started doing these these deep brief episodes available for bankless premium subscribers and that's really an

opportunity for you and i we used to have these discussions all the time after a podcast actually uh talk about the podcast that was and do a full debrief of of our thoughts um that i think is one of the times i level up the most is those after podcast conversations where we sort of dump our our thoughts and our primary takeaways and and talk about them and that's going to be now made available for bankless premium members yeah i do get a lot of learning out of those conversations and i'm pretty happy

that we are making these conversations available to bank spankles premium uh subscribers uh they're one of the my favorite things about bank list is that there's two of us and so we actually get to like throw ideas back between each other because like obviously one person can only have one person's ideas and so these are the times where we we sit and reflect upon the podcast that we just had literally as soon as we're done recording a podcast ryan and i hop into a zoom and be like so to make sure it's not stale then we hop into a zoom and hit record and so that's what those debriefs are 20 30 minutes long for the bankless premium subscribers so if you

are interested in those uh there is a link in the show notes available to you so you can go watch those all right david let's start with the question i ask you for every state of the nation what is the state of the nation today the state of the nation is growing we are growing the pie like i'm sure you are getting text messages ryan i'm getting text messages uh about people who are interested in bitcoin interested in ethereum interested in deep trying to figure out what this is all about and of course people are just throwing money at this industry right now right like we are not in in in a scarce environment

right now there is less competition going on and i think that's kind of why bitcoiners and ethereum these ecosystems have generally separated is because like in bear markets people fight right but in bull markets there's abundance there's not much need for fighting like all protocols are receiving basically all the funding that they need to continue and i see this dynamic uh and what this is really relevant to is the uni swap vs sushi swap conversation uh i think a lot of there's a decent number of people that perhaps have a bad taste in in their mouth about sushi swap from

the way that it was uh spawned from the way that was birthed into the world uh there's this conversation of a vampire attack we get i think we're going to get into the subject uh when we talk to mackie um but there's this competitive error about like you know if sushi swap wins unit swap loses no or or vice versa unit swap wins or sushi swap uses like no i don't think that's what's going on i think this pie that we have this defy pie is growing at such an incredibly large rate that like that the fact that there is both uniswap and sushi swap which are maximizing in their own core

competencies illustrates like how much abundance there is in this world right now especially in the world of dfi and so the state of the nation orion is growing we are growing absolutely well said i think very often the crypto tribes sort of get into this trap of thinking that this is a fixed pie fix some game it's not even within within different uh within different chains bitcoin plus ethereum bitcoin is better because ethereum exists ethereum is better because bitcoin exists this is all on-ramps from the traditional banking system to this

new banking system and it is all additive and i think that's what the the sushi swap versus uniswap uh example really really showcases it is because of sushi swaps existence unit swap is that much better and has that much more volume dave we're going to get to that in just a minute but first we should take a minute to talk about the sponsors that made this episode possible if you are looking for a product that connects your fiat bank account with d5 tokens and products you need to download

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welcome to bankless state of the nation how are you doing today hey ryan hey david david thank you for having me um just very quick and from a core contributor to sushi swap i don't actually code we have like a cto and a bunch of core developer helping on this side of things so really i'm just instrumental in growing the protocol making sure that the community is tended to and so on i'm the one ensuring pretty much everything that is awesome well thank you so much for it for clarifying and

you know i think where we should start is could could you give us some history so for folks that uh weren't here don't remember uh for me d5 summers was sort of a blur in many ways can you give us a history of the project like how did things start take us take us through the story so far yeah sure no problem so we started the end of august with only a medium article uh discord and then we just we grow we grew to 1.0

8 billion i think in tvl in almost a week or so uh which all came from uni swap lp tokens at first before we add our first uh migration to our own uh set of smart contracts that were basically a fork of the uni swap ones and all of this was uh made by um sheriff nomi which was one of the three co-founders back then uh including me and sushi sushi swap chef

so this is kind of how we got started the goal were very clear from the beginning it was going to be a community-led fork of uni swap and they kind of grew into this uh massive i guess protocol and umbrella under like an open org model that was pioneered by urine wi-fi and so on so this is kind of where we started and um since then we're kind of keep iterating we have been funding some teams to work on multiple

projects that are in the same um ecosystem as sushi so we have a bento box we have musoku we have miso and so on all of these are added by uh different teams of developers some of them are more supported by the court core team than others and so on so this is it it's pretty simple i've been like a

fervent ethereum uh community member since i would say uh early 2017 or so before the big ico mania i got interested back to crypto after um i guess being dormant for three four years and then i discovered ethereum and all of the possibilities of smart contract and from there i kind of i've always wanted to join the the ecosystem in the community but never really had any um

what can i say experience in the field so it was very hard for me to get the confidence to basically take ownership and go on and just send some resume and etc so i just never participated until i kind of saw sushi swap and i've always wanted to contribute to uni swap and kind of the dex field so i took ownership and i just rolled with it you know so maki what what yeah yeah what would you say um i think

my part of my some folks over d5 summer have kind of a bad taste left in their mouth still with sushi swap um you know i think part of it was initially the the birth the genesis of sushi swap um some called it kind of a vampire attack of this this other d5 darling which is which is uniswap um i would love for you to talk about that and then also kind of the second event that happened is uh chef nomi and um like maybe describe that because that i

have still a lingering taste and bad taste in my mouth from from i guess probably the the chef nomi event can you talk about what happened there and uh its impact in in kind of the history and trajectory of sushi swap yeah no problem i mean we can keep it very simply um the fact that we call it an attack when you know back then uni swap at maybe 250 million dollar in tvl is pretty i think ridiculous a lot of

people got introduced to being an lp because of this whole kind of liquidity mining phase and craze etc so calling it an attack is kind of really i think meaningless in a way i think it was just like we unlocked for the first time uh an amount of liquidity and you know assets that were dormant in the ecosystem and this is what is bringing you know so much i would say attention to the to the space and ecosystem we basically

were able to grow um more in one month than the entire year of 2020 with all these incentives and kind of teaching people newcomers how to lp for the first time before that you know you were only like putting some assets and they were quote-unquote giving you tokens now we were actually helping and you know this had this tremendous impact of changing the the game right we went from 500 million to one billion dollar um

locked in d fight to today we're at 26 billion dollar and i think we're on track to 100 million by the end of the year and how you how do you do this you bring new people to the ecosystem you make sure that they are able to easily earn yield on their assets and productivize them so mackie david stated state of the nation that this week was um growing the pie and you feel you really feel like sushi swap did that not only for d5 but also for unislop it brought more volume and value to the d5 ecosystem and

also to uniswa yeah what happened is we were able to not only i guess make them launch a token to actually be open and governed by the community but we were also able to make sure that these people were incentivized to provide liquidity so what we did is the biggest gift lp could have wished for in a very long time and we and this is kind of what i am kind of experiencing here it's not about just like oh it's it's a forward it's not a fork it's not about making sure that lps are taken care of

it's not just a 0.3 fee going to them anymore it's you know i think we're going to be seeing a lot of innovation coming on this side of things where capital is going to be not just more efficient but capital is going to be more smart capital strategies to deploy capital is going to be uh less with less risk less impermanent loss or division divergence loss whatever you want to call it and um yeah this is kind of it uh for know me i think uh very quickly uh brief on the subject because it's been quite some time and

you know he's not involved anymore in the project i think there was some inflammatory i guess uh toxic comments being made and thrown around on twitter uh everyone was all a bit uh we sit at florida pool in french so i would say uh everyone everything was tense back then and uh you know it's uh it we're past this i don't think his actions were to praise at all but we everyone kind of

he was under pressure he cracked a little bit and here we are now it's past us and we can make sure that this is community owned and he's gone but the community is marching on right exactly i do think that the fact that this project succeed even though that we had like i guess this first incident it just makes sushi swap stronger every time along the steps right yeah we are you know improving we have like difficulties all the time but we

are making sure to fix the the problem that we were we have on our way and so on i wanted to go back to your your comment maki about uniswap was um you know use swap of course famously airdropped a token to its users in september how much of the decision their decision to airdrop do you think was because of sushi swap i don't know about the decision to

airdrop i think it was like a very good marketing stunt i think it kind of uh made sure to align incentives uh for people that use the project before and to guarantee that you know some of the i guess most fervent uni swap uh lp and you know like believer we would have like a say in the protocol uh you don't give like a thousand token to sex holder for fun right you want to have uh the most uh die-hard fan of your protocol being able to have like a meaningful voice and i think that this was great um i don't really i don't

really agree with uh how the governance was been kind of uh blocked or you know like the requirements were very uh strict at first they are in a different legal landscape than us they are based in the u.s so i do understand all the ramifications there so so bottom line is though you think that the birth of sushi swap brought some competitive pressures to to unit swap even exactly and and provided more benefits for both unit swap users and

their lp's i i do think so yeah so there's a very interesting story here because uniswap got off to this very rocky star and i i am i am personally convinced that the vampire attack was less of an attack and more of a value add yet that was the branding and then on top of the branding of the attack on unit swap there was um the the chef nomi that took the dev fund and ran that's behind us

uh sushi swap has turned turned into this uh pillar of a community and has kind of led the charge into seeing what can really be done when you have a bottom-up community take control over a project and turn it into something awesome and so now the the branding behind sushi swap has nothing to do with uh you know chef nomi or uh the vampire attack and it's now something that's i would say is largely differentiated what would you

could you describe the process that sushi swap went through to go uh to get to this point like uh people thought including me uh that sushi swap was was dead in the three month like d5 bear market between d5 summer and where we are now yet that was the opposite of the case can maybe you can tell us a story of like how sushi swab came to be into what it is now i think it's very easy david um there's always someone to enter at sushi like whether you want to be building uh

we will help you we will give you a grant if you know like the work has been done and so on we will never like we will always support efforts of you know people that are willing to do partnership we have like you have some issues with you know like uni swapping itself then you can fix it that's sushi it's going to be implemented and push granted that it passed like all the security uh you know the workflow but what is it very important is pretty much we were able to get like a die-hard community of builder and people that resonated with this ethos of you know

actually um community-led where you know actions and votes are accessible to anyone like this is kind of what made us you know very different we have like a very clear uh token accurate value to actual value to the token uh i mean the rules are very simple and it's just how we were able to grow i think is by collaborating with other protocols making sure that our dev designer or else is our tendent to

and so on like this is just the key it's collaboration it's being open um we're not like a team we're not based in you know in a single country or city there's a lot of hurdles to this you know and the way we work as an open r can be very messy but once you get like inside this discord once you get inside the the talking the forums you get you kind of realize that there is actually like a soul into this project there's a community that loves what we're doing and i think this is why we were able to come back from this bear market

so what would you say is sushi swaps core competencies what are the things that it's good at that really differentiates itself from uniswap i think we're very good at many things i would say like uh first of all we are always improving i guess everything related to the ui we are you know we even if we started with like three different ones it was super messy at first we're starting to you know unify all of this together into something that is more easy we were able

to get like integration with partners that were not uh able to get on uni swap for months because they had like no uh support so we are like we're providing a white glove service to like all the project with recorder dev uh this is just like what we are good at right now we're also very uh open-minded on other alternatives on the blockchain so we're thinking about um you know crosstalking swaps on ethereum powered by torch chain we're thinking about going on polka dots with moonbeam and so on like we even

have like a grant right now for a good move to the ceramic system not moving any liquidity but literally opening uh new branches where you know assets can be swapped on other chains and i think this is the fact this is very important because if you're not i guess open to to other communities and bridge them together then what is the point of being community-led so so close-minded i think that fits into the conversation of where we wanted to to take this

because i think one of the differentiators between sushi swap and unity swap is that sushi swap has developers that talk to other projects um famously iron and urine i think is that actually the correct pronunciation um mackie maybe you could talk about uh the relationship between sushi swap and urine yeah the the urine ecosystem is very fascinating it's really just a a group of individuals with the same values i think we're talking about this

specialization we're talking about open org we're talking about um fervent uh developers like people that are intense and everything that they do and we are able to kind of leverage each other competencies and um basically help each other it's just like an alliance in a way where um we all get together to work and make sure to execute on the same pace it can be right now i can tell you for a fact that we are swamped with things to do so it can be very difficult

but every month i think or so every two weeks we have like these inter team calls where we can make sure that you know we're on pace on partnership collaboration and so on so and you know it does that's been wonderful to see like you know cream pickle acro yearn all of these wonderful projects in my opinion kind of slowly united thing into something so i we've kind of seen this pattern maki i i think before in crypto right so you have sort of your your um

almost your your first mover and then you have your fast mover right so in the crypto bank world you have coinbase first mover and then you have binance which is fast mover uh and then in the decentralized lending world you have compound which is kind of first mover and they're a bit more slow and cautious and then you have ave which is like all the assets we're going to try uh flash loans we're gonna we're gonna build um all of these new things we're going to embrace assets that compound doesn't first uh we're going to you know push the bleeding edge a bit more is that the

the right dichotomy would you say with the difference between a uniswap and a sushi swap now that um uniswap is kind of first mover uh whereas sushi swap is is trying to be a fast mover that's um a bit more embracing of of things that might be you know cutting edge it's a good it's a good uh the economy or analogy uh i don't think it's fair to say that you know we're kind of the fast mover of uni swap because i do believe

that they are right now are that working working on some groundbreaking innovation and so on we are really just like trying to do our own path from now on and you know we're going to capitalize on compass ability and you know flexibility of things i don't know if you've um maybe we're going to talk about this later on for what is coming up for sushi but we're trying to bridge you know like a different world at the moment we want to make sure that the d5 can access um retail and you know like this the centralized exchange of this world to make sure that d5 can grow even bigger

uh we do have also like other plans for scalability and so on but maybe we can talk more about this later the fast mover is uh it would say that you know uni swap is is not moving and i think that's not fair how would you differentiate um the sushi asset between the uni assay like how how would you characterize how unit swap the protocol uh leverages and uses its uni the asset and then how would you compare that to how sushi leverages sushi the asset

i think cuny is just a type of sushi personally i think they will try to at some point get some value across the token otherwise i don't really see the value in just a pure governance so can that you know votes and the way it has been distributed and so on uh it's very hard to get to this tipping tipping point for voting and proposing and so on uh i did i do know they have like um they're using compound contract right so they can in theory ask for more vote but

it's still very uh very complicated i think the egg sushi or like the sushi in in itself is not just attracting fees from the amm too you know like this is kind of part of the strategy it's um it's going to be coming from multiple products under the same umbrella i think that's one of the key differentiation unless uni swaps start to expand as like you know over the amm reveal it's always going to be a very two different product the the goal is the

same it's governance but we're also like paying or um or token orders we are giving yeah yeah oh go ahead yeah sorry but maki i i don't want to box you in again with another like kind of pattern or dichotomy but like i'm about to try another one on you so um i i it seems like there's also another dichotomy with d5 protocols in that you get for a similar market you get one protocol that is kind of u.s based has silicon valley type investment or

traditional venture investment and then you get another protocol that is outside of the us outside of like traditional u.s legal apparatus not necessarily a venture funded more bottom-up community so again an ave versus compound kind of like comes to mind right um or like a maker versus synthetics um do you think the fact that your founders are um pseudo anonymous outside of the us

does that give you more flexibility in terms of the things you can build we're just talking about value accrual to sushi the token does that even give you more flexibility to design a like higher value accrual token what are the benefits there in your approach yeah i do think that is beneficial and you know instrumental in the success of sushi um this is kind of tricky i don't know why the us government is so um constraining all this innovation blockchain what we're seeing is anyway like most of these teams are now outside