Finance Redefined is Cointelegraph’s newsletter that focuses on DeFi’s latest 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 Uniswap team members. This particular feud occurred because he complained about developers who forked someone else’s code and launched it themselves. For those unaware of the irony: this is basically some SushiSwap, a member of the Yearn ecosystem, initially did Uniswap.
More importantly, Cronje also complained about what he sees as a legitimate DeFi community and the concept of giving away tokens without the commitment of a founder.
Cronje’s argument can be summed up as follows: DeFi users are largely speculators who are 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 that the number is rising and will hold the developer personally responsible if he doesn’t.
Finally, Cronje warns against giving away tokens. The development costs for Yearn are apparently higher than the value of the few tokens he has grown. Launching a product that brought in hundreds of millions of dollars essentially made him poorer.
A community that is difficult to please
Cronje’s categorization of the DeFi community can be applied to the entire crypto ecosystem. I also believe it is just a natural result of there being tokens to get rich. Would you ever participate in the Discord or Telegram chat for, say, Bank of America? Costco? Coca Cola?
There are certainly people who enjoy interacting with these huge brands. However, you generally don’t care what it does on a daily or monthly basis without a financial interest in the business. Do you think that is possible? ever be an enthusiastic community behind Swift, the banking infrastructure layer? No? Throw in a token that can make huge profits and boom, you’ve got the Swift Army.
I suspect there is a reverse survival bias that is causing Cronje’s complaints. Most token holders are apathetic when getting is right, but heavy losses can frustrate them so much that they could vent with the developers.
The case for venture investments
Professional investors are a very different breed. A good venture capitalist will never ignore or fail a portfolio company’s team to value their successes. They also likely have the experience to know that price does not equal fundamentals, meaning they will support projects they believe in, even if losses increase.
Regarding Cronje’s financial situation, there is one more important lesson we can learn from professional investors. Contrary to what most people expect, venture capitalists often want founders to have high salaries and a lot of equity. They end up investing in the people behind the project – the last thing they want is for the developers to worry about how to pay the rent while spending 110% of their time getting it started.
Ideals like fair launch, no pre-mine, community property, etc. sound great on paper, but in practice they may not be as effective as people think. There is certainly a balance here, as greedy founders are just as damaging to the success of a project. But I don’t think throwing the baby out with the bathwater is the solution.
The Yearn community could eventually decide to offer Cronje a huge salary to thank him for his continued efforts, which would be great proof of the effectiveness of decentralized autonomous organizations. But this decision would also make it clear that there is no point in reinventing the wheel of entrepreneurship to pursue some misguided ideal of fairness. Venture capitalists can be very valuable, and rewarding founders is both pragmatic and fair.
I’d rather invest in a venture-funded project that’s honest about what it is than join a ‘fair launch’ where the founder lands the project for $ 24 million (temporary).
