Bessie Liu

David Canellis

SushiSwap DAO CEO Jared Grey has disclosed the operation’s Budget Snapshot for 2023, with more than $5.2 million slotted to maintain the decentralized exchange (DEX) next year.



The platform, stewarded by a DAO, will spend more than 80% of those funds across 15 salaries, including $500,000 in USDC to “head chef” Grey (salary recipient names were redacted on Twitter). That works out to be around $286,500 per team member on average.



The remaining DAO budget, about $919,000, will go towards SushiSwap operational overheads such as legal fees, subscriptions, freelance contributor compensation and social media management costs. 



One undisclosed freelancer is budgeted for $12,000 per month, just $500 less than the averaged monthly retainer for Sushi&#8217;s legal team.



Grey addressed the compensation-heavy budget and stated that transparency is a “critical component of a successful DAO.



“[For what it’s worth], any project is only as strong as its talent and community; talent requires proper compensation through grants or as a full-time contributor with a salary. The current team is dedicated and proven; 2023 will see Sushi deliver an innovative DEX model.”



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" src="https://flo.uri.sh/visualisation/12169307/embed#?secret=2epQy0v2QL" data-secret="2epQy0v2QL" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div></figure>



Grey’s tweet comes soon after SushiSwap <a href="https://twitter.com/jaredgrey/status/1602057430631940098" target="_blank" rel="noreferrer noopener">disclosed</a> a $30 million loss over the past 12 months. He said the protocol&#8217;s emissions-based reward strategy — which pays participants in native token SUSHI — failed to incentivize liquidity providers.&nbsp;



SushiSwap, which runs on Ethereum, competes with DEXs Uniswap and Balancer.&nbsp;Once one of DeFi&#8217;s largest protocols, much of SushiSwap’s dominance has slipped over the past two years due to <a href="https://blockworks.co/news/sushiswap-swaps-out-co-founder-0xmaki" target="_blank" rel="noreferrer noopener">leadership controversies</a> alongside allegations of improper spending, including $9,000 dinners and $5,000 tickets to industry mixers.&nbsp;



Its SUSHI token, which DAO participants must hold to vote on governance, has been hit hard by the bear market. SUSHI trades at $1.12, down more than 85% this year. For scale, bitcoin is down around 63% year to date alongside ether (ETH).



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">As I promised in Sunday&#39;s tweet regarding Sushi&#39;s Budget Snapshot for 2023, I am making the DAO operating costs public. Transparency is a critical component of a successful DAO. You can see most budget costs are salaries. 1/ <a href="https://t.co/rVHXEJSfLR">pic.twitter.com/rVHXEJSfLR</a>&mdash; Jared Grey (@jaredgrey) <a href="https://twitter.com/jaredgrey/status/1602701300520652800?ref_src=twsrc%5Etfw">December 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">SushiSwap DAO proposal for a sustainable business model</h3>



In an effort to get SushiSwap into shape, Grey recently <a href="https://forum.sushi.com/t/reinstated-increase-kanpai-treasury-allocation-to-100/11475" target="_blank" rel="noreferrer noopener">re-proposed</a> shaking up how the protocol structures its revenue flows. SushiSwap DAO <a href="https://www.bloomberg.com/news/articles/2022-10-03/defi-project-sushi-finds-a-new-leader-to-save-its-struggling-business" target="_blank" rel="noreferrer noopener">hired</a> Grey, a crypto entrepreneur and tech consultant, in October.



Dubbed the “Kanpai and Treasury Payout Ratio,” the move would allocate all protocol revenue (trading fees) to SushiSwap DAO’s treasury to pay budget costs. SushiSwap previously paid only 10% of fees to the treasury, and Grey said the DAO has around 18 months of runway as things stand.



If passed by token holders, the payout ratio will stay in place for one year or until new tokenomics are suggested and implemented. Projected revenue sits around $6 million (15% higher than its budget) and will be received by the treasury in the form of 50% ETH and 50% USDC. 



“The Kanpai proposal will reinforce Treasury diversification, secure its future runway and promote a successful pivot of the DEX business and token goals,” Grey <a href="https://twitter.com/jaredgrey/status/1602701303716651009" target="_blank" rel="noreferrer noopener">tweeted</a>. “Diversification allows Sushi&#8217;s Treasury to earn USDC and ETH without selling tokens.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Although tokenomics are a core part of restructuring the DEX business model, it&#39;s not the total solution. We&#39;ve redesigned how we bootstrap liquidity on the exchange; we no longer entirely subsidize liquidity with emissions but via a more equitable mechanism. 9/&mdash; Jared Grey (@jaredgrey) <a href="https://twitter.com/jaredgrey/status/1602057435530895364?ref_src=twsrc%5Etfw">December 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Despite a push for transparency, some community members believe SushiSwap DAO is overpaying its talent (the DAO <a href="https://thedefiant.io/sushiswap-votes-on-head-chef-salary" target="_blank" rel="noreferrer noopener">voted</a> in August to cut CEO $800,000 compensation by more than a third). Others have <a href="https://cryptoslate.com/sushiswaps-jared-grey-proposes-to-allocate-100-of-xsushi-revenue-to-treasury/" target="_blank" rel="noreferrer noopener">voiced</a> belief that SUSHI holders should receive a slice of the trading fees.



“Paying [$300,000] a year by employee without bonus just to add some effect on the UI, sponsoring a lot of crypto events around the world is not a good way to spend money,” pseudonymous DAO member GoldenNaim <a href="https://forum.sushi.com/t/reinstated-increase-kanpai-treasury-allocation-to-100/11475/22" target="_blank" rel="noreferrer noopener">wrote</a> in the proposal discussion.&nbsp;



Alex Shefrin, business development lead at SushiSwap, replied further down to suggest its core problems stemmed from past leadership decisions, which left the protocol without an underlying business model to “sustainably capture the value that we are creating.”



“[And] frankly we spend a lot of time here fighting this point,” said Shefrin. The Kanpai proposal currently has 97 voters, with 64% voting “Yes &#8211; Secure Sushi’s Future with Kanpai.”



A complete financial audit of Sushi can be expected in the first quarter of 2023, Grey said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/daily">Blockworks Daily</a>: Unpacking crypto and the markets.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Jared Grey

SushiSwap DAO Budgets $5.2M, With 82% Going to Salaries

Jack Kubinec

<div id="highlights-block_635c1af1eaf96" class="highlights">
 <ul>
 <li>Proper legal frameworks need to be developed to protect individual members of DAOs for being personally liable for actions and obligations</li>
 <li>Wyoming’s laws do not take into account the uniqueness of DAOs, crypto-focused attorney says</li>
 </ul>
 
</div>



Despite the push in select US states to become more appealing to DAOs, blockchain protocols and assorted decentralized collectives are still often opting to incorporate in traditional tax havens.



The trend has something to do with definitions: DAOs (<a href="https://cms.blockworks.co/the-investors-guide-to-daos/" target="_blank" rel="noreferrer noopener">decentralized autonomous organizations</a>) are fairly well-understood in crypto circles. That definition, however, does not hold water with the SEC or state-regulators who are sure what to make of DAOs: from how they’re structured to what taxes they may owe.



DAOs, primarily, are a group of individuals who use blockchain tech and on-chain voting mechanisms to make business decisions.&nbsp;



Most commonly deployed in decentralized finance (DeFi) governance today, the emergence of DAOs has raised legal concerns around the world.



In the US, select states have made bold attempts at creating corporate structures that provide legal protection for those participating in DAO endeavors.&nbsp;



Among them is <a href="https://www.google.com/url?q=https://cms.blockworks.co/pro-crypto-wyoming-not-yet-pro-enough-to-attract-bitcoin-miners/&amp;sa=D&amp;source=docs&amp;ust=1666985534481409&amp;usg=AOvVaw1Npe_YXUFEmJULhu0Df96s" target="_blank" rel="noreferrer noopener">Wyoming</a>, the first to legalize DAO LLCs — meaning traditional legal protections for LLC members were extended to any individuals that participated in DAO activities.



Delaware, too, has attracted attention from DAOs for its flexible LLC laws that would protect individual members of the DAO for being personally liable for any actions and obligations.



Brian Frye, a law professor at the University of Kentucky, told Blockworks that “Delaware is kind of the center of gravity of the corporate form in the United States, because Delaware as a jurisdiction figured out what was attractive to corporations.”



Even so, many organizations are still opting to incorporate overseas. Most recently, SushiDAO, the governing body of decentralized crypto exchange SushiSwap, made the decision to <a href="https://cms.blockworks.co/sushidao-seeks-shelter-in-cayman-islands-panama/" target="_blank" rel="noreferrer noopener">set up a new legal structure</a> in the Cayman Islands and Panama.&nbsp;



Neil Bhasin, a SushiDAO community member, <a href="https://forum.sushi.com/t/recommendation-for-sushi-legal-structure/11158/16" target="_blank" rel="noreferrer noopener">said</a> this decision was made because “Panamanian foundations are non-commercial in nature and do not have beneficial owners.”&nbsp;



Mike Selig, a crypto-focused attorney at law firm Willkie Farr and Gallagher, said that Wyoming’s DAO law does not take into account the uniqueness of DAOs — but has simply taken an existing LLC law and stamped the idea onto DAOs.



“Certainly a lot of these DAOs would prefer to be in the United States…but there’s not a legal wrapper that really works,” Selig told Blockworks. “What we need is a new type of legal entity that really is tailor fit for [DAOs]”



That’s not to say moving offshore is the best short-term solution, he said.



“The biggest downside in my view is that from a US perspective, [is that] courts and regulators will not respect these offshore corporate forms,” Selig said.



Frye said he, too, thinks DAOs need to take a more active role in pinning down and advocating for the needs that come with their unique structures.&nbsp;



“Until they figure that out, it’s not going to be clear how a jurisdiction is going to make itself attractive to them,” he said.&nbsp;



Added Frye: “People have started creating the organizational form — without necessarily knowing what they wanted to do yet…The older market structures are so familiar to us that it makes it really hard for us to see these new market structures for what they really are.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/daily">Blockworks Daily</a>: Unpacking crypto and the markets.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>