The Emperor Has no Clothes
Which is a lot, really: SUSHI is, in the weird mystical ERC20 sense, a unicorn.
So congrats @NomiChef!
And it might. As we talk, it does sorta seem like maybe we passed peak SUSHI hype; SUSHI is "down" to $8.
But I don't think it's as obvious as it seems.
Well, here is yield farming, in its purest form:
Take a token Y. You put Y in a Uniswap pool with USDC.
Then each day, one Y is dropped on the holders of the pool token, 1 Y to 1 Y.
So each day supply doubles.
The key here is the pool. And not because of the liquidity (!!!).
AMMs do something way more powerful for vegetables.
AMMs give Y a "price". And if you're lazy, that price doesn't change.
But instead you drop Y _outside_. So the pool's too dumb to realize there are more Y's out there.
Now who cares you ask? People could always change that price! But for one moment--one glorious moment--Y is a unicorn.
Yield printer go brrrrrrrrr
Except. Why is BTC the most valuable coin, and not BCH, or ETH, or DOT? Is it because of its unique design? Maybe.
But really, BTC is worth $220B because it trades at $12k.
And it trades at $12k because we all agree it does.
But if we all woke up one day feeling like maybe BTC was worth $1k, and someone all exchanges cleared all orderbooks....
And so BTC would be worth $1k. And maybe we all decided that BCH took its place, or XTZ, who knows.
Coins are what we agree they are.
Normally this is pretty straightforward. For BTC, you take the longest valid chain, and that's real. And if you mine another block you mine on that chain.
So all of their machines turn back 100 blocks, and start mining from there.
Blockchains are what we think they are.
Some things have direct physical value.
To some extent--to a very real extent--everything else is what we all make of it.
Most value in the world is born from and sustained by our collective imagination.
What is Y worth?
Well, let's say it was trading at $1. Then comes the yield, and there are twice as many of it.
What's it worth now?
Well, you look at the AMM, and... looks like about $1.
And maybe it "should" be $0.50 now. But it's not like $1 was any more blessed before than it is now. And just because a token was worth something doesn't constrain what it can be now.
I looked at the pool and the pool told me $1. Even @coingecko agreed!
So $1 it is, and the market cap of Y doubles.
Yield go brrrrrrrr
But now, also, we're all richer, out of thin air.
Well we can't _sell_ those riches, not withing crashing them.
But the world has no more bread, or houses, than it did before. We got more of them, at the expense of everyone who agrees that Y is still worth $1 but doesn't have any.
Because when you do, sometimes, everything is exposed.
But he taught us something else, too. See we divide the world up, into vegetables and blue chip projects.
But maybe sometimes those gatekeepers of our ecosystem were made out of our collective imagination.
And when some yield shows up, and our belief flickers from one pool to another...
If so, here’s one last meal.
dex.projectserum.com
And if not, long may he captivate our imagination with his craft.