Mochi Inu gets pulled out of the Curve Wars
Curve’s Emergency DAO blocked Mochi from receiving emissions after identifying its sketchy approach to gain voting power.
The Curve Wars are getting fiercer. The contest recently saw the undoing of a young protocol called Mochi Inu as its tactics came across as an attempt at a governance attack. The incident also reveals some ideological gaps that can still be seen in DeFi.
Here's what went down.
What is Curve?
Governance tokens have been the go-to way for DeFi projects to spread authority over their protocols. @CurveFinance, an automated market maker known for trading stablecoins, has also made this a key part of their revenue models.
Their native token, $CRV, serves important use cases. Fresh $CRV is emitted every day, and it’s distributed to depositors in Curve’s many liquidity pools. Simply put, it's a key source of liquidity rewards for multiple other protocols pools on curve.
Mochi Incident
Curve was in flux recently when a meme coin project @MochiDeFi tried to take advantage of their DeFi governance mechanisms. Mochi executed a series of transactions that tilted CRV rewards in its favour by using a token-locking mechanism in @ConvexFinance, a yield farming protocol.
Curve said that this constituted a clear governance attack, as a result of which the Curve Emergency DAO, a nine-person group with limited governance powers, cut off Mochi's rewards.
Curve Wars
Mochi gained a place next to the major players in the Curve Wars, but their almost immediate fall shows they came too close to tempering the system. This tussle for $CRV emission rewards is a common practice amongst protocols which is often called Curve Wars.
Every player in the Curve War seeks to increase their TVL by rewarding attractive yields to their users. To offer the highest yield, these protocols accumulate points in the form of veCRV tokens. veCRV tokens allow them to boost their yields and control Curve governance votes.
Yearn, Convex and Stake DAO are the largest holders of veCRV & have more influence over the Curve Finance DAO. Apart from these protocols, all sorts of entities looking to incentivise their token pools or projects are in the Curve Wars.
What did Mochi do?
Mochi was initially lauded by many as an underdog against the big wigs in the Wars. It gave users incentives to deposit assets in a Curve pool that included $USDC, $USDT, $DAI & Mochi’s native stablecoin $USDM. This managed to attract over $170.2 million in liquidity at its peak.
On Wednesday, the mechanics of the protocols that participated were put on display. A Mochi team member swapped $46 million in $USDM for $DAI using the Mochi Curve pool, swapped the $DAI for $ETH and used a large portion of that $ETH to purchase massive quantities of $CVX.
https://etherscan.io/tx/0x938fbfa11faf7692fd4b422a5ba056d06fbcbe3d62bb0eb3e4b579ea5dd4ea33
This would have allowed them to vote on additional $CRV rewards for the Mochi pool, which in turn would have attracted additional liquidity, heavily tilting $CRV rewards in their favour and attracting huge sums of liquidity to their platform.
Monopoly over governance?
This incident prompted significant debate in the DeFi community. Some believe that Curve’s Emergency DAO mishandled the situation & singled out a small protocol. But other prominent DeFi figures started calling out Mochi on their "scammy tactics".
Mochi's founder Azeem admitted that he took a different approach to gain the voting power but he also suggested the strategic fears that whales can induce against new protocols. He went on to blame an unnamed “DeFi cartel” for how Mochi Inu has been treated.
Conclusion
The very existence of an emergency DAO is getting its share of disapproval. The extent to which this can affect new legitimate protocols is being discussed heavily. Wasn't this extensive amount of voting power always seen as a threat to the sovereignty of DeFi?
Endnote
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