SushiSwap Proposes Smaug Debt and Bond Treasury Management

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In Brief
  • A SushiSwap Smaug market could enable the trading of 'SBonds.'

  • These collateral backed bonds could help boost Sushi treasury.

  • SUSHI token prices continue to tank, dropping 9% on the day.

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Decentralized exchange (DEX) SushiSwap is mulling ideas on how to raise funds for protocol treasury without negatively impacting its community.

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In a governance proposal on July 18, Cinneamhain Ventures partner Adam Cochran suggested partnering with other DeFi protocols such as UMA and Yearn to build a debt-based treasury management protocol on top of Sushi’s ecosystem.

He noted that SushiSwap would get a way to raise funds from locked treasury assets that it can buy back if needed. It then has a way to make revenue off of other protocols that need a more diverse treasury.

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“It seems with the Sushi attempts at fundraising, there is not only high interest in locked token bonds, but, also a need for a controlled market of these which allow for the sale of these assets in a regulated fashion.”

The concept has been dubbed Smaug after the dragon and treasure keeper in J.R.R. Tolkien’s The Hobbit.

Treasury top-ups with SBonds

SushiSwap has lost 55% of its liquidity since TVL hit an all-time $5.7 billion high in early May. Additionally, its token price has tanked more than 70% from its mid-March all-time high, so there have been a few efforts to raise treasury funds to support the project.

One such proposal suggested using up to $60 million, or 25% of the treasury, to onboard institutional investors by offering SUSHI tokens at a 20-30% discount. This did not go down well with the majority of the community, however.

Smaug is a slightly more balanced approach that proposes a protocol and market for selling treasury-backed, convertible debt bonds called ‘SBonds.’ The DAO can use tokens in their treasury as collateral to issue an SBond, Cochran explained.

He elaborated that the SBond will consist of several treasury tokens, a yield strategy, maturity date, a minimum deposit in USD, an annual interest rate, and various payment and earning options.

The Smaug Market would be an after-market where issuers and allowed buyers can buy and trade existing market SBonds through SushiSwap provided AMM pools, he added.

Early responses to the well-thought-out proposal were positive and it appears to be much more acceptable than selling discounted tokens to whales.

No reprieve for SUSHI prices

The DEX’s governance token has continued to slide, however, dumping a further 9.3% in the past 24 hours to trade at $6.86 according to CoinGecko.

SUSHI’s losses are now accelerating with a 16% decline over the past week and more than 70% lost since its peak.   

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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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