Finance Redefined is TBEN’s newsletter dedicated to the latest DeFi events and trends, delivered to subscribers every Wednesday.
This week, I wanted to highlight Andre Cronje’s recent confession on Medium, which sparked quite a bit of discussion and quite a bit of salt from the members of the Uniswap team. This particular argument happened because he was complaining that the developers were only forking someone else’s code and running it themselves. For those unaware of the irony, this is essentially what SushiSwap, a member of the Yearn ecosystem, initially did at Uniswap.
More importantly, Cronje also complained about what he perceives to be a titled DeFi community, and the concept of donating tokens without a founder’s participation.
Cronje’s argument can be summarized as follows: DeFi users are largely speculators paid to use the projects, and see price action as the ultimate sign of their success. No matter what kind of work the developer does, the community will always only care about the increase in numbers and will personally hold the developer accountable if they don’t.
Finally, Cronje cautions against donating tokens. Yearn’s development costs seemingly exceed the value of the few tokens he cultivated. Essentially, launching a product that has attracted hundreds of millions of dollars has made it poorer.
A community that’s hard to please
Cronje’s categorization of the DeFi community can be applied to the entire crypto ecosystem. I also think it’s just a natural consequence of the fact that there are tokens to get rich. Would you ever join the Discord or Telegram chat for, say, Bank of America? Costco? Coca Cola?
There are definitely people out there who have fun interacting with these big brands. Overall, however, with no financial stake in the business, you really don’t care what they do on a daily or monthly basis. Do you think he could already be an enthusiastic community behind Swift, the banking infrastructure layer? No? Throw in a token that can make huge payouts and boom, you’ve got the Swift Army.
I suspect there is a reverse survival bias that triggers Cronje’s complaints. Most token holders are listless when the outcome is good, but heavy losses could frustrate them so much that they could start to let off steam with the developers.
The case of venture capital investment
Professional investors are a whole different breed. A good venture capitalist will never ignore or fail to credit the team of a holding company for their successes. They are also likely to have the experience to know that price is off fundamentals, meaning they will extend their support to projects they believe in even if losses increase.
As for Cronje’s financial situation, there is another important lesson to be learned from professional investors. Contrary to most people’s expectations, venture capitalists often want founders to have high salaries and a lot of equity. They ultimately invest in the people behind the project – the last thing they want is for developers to worry about how to pay the rent when they have to spend 110% of their time getting started.
Ideals like fair launch, no pre-mine, community ownership, etc. look great on paper, but in practice they just aren’t as effective as people think. There is certainly a balance to be found here, as greedy founders are just as bad for a project’s success. But I don’t think throwing the baby out with the bathwater is the answer.
The Yearn community might ultimately decide to offer Cronje a huge salary to thank him for his continued efforts, which would be a great testament to the effectiveness of decentralized autonomous organizations. But this move would also highlight how pointless it is to reinvent the entrepreneurial wheel in pursuit of a mistaken ideal of fairness. Venture capitalists can be very valuable, and rewarding founders is both pragmatic and fair.
I’d rather invest in a project funded by a company that is honest about what it is rather than participate in a “fair launch” where the founder ends up pulling the project for $ 24 million (temporarily).