Andre Cronje, the founder of the popular Yearn Finance protocol and its governance token YFI, deployed another ‘experimental’ contract yesterday.
Expectedly, a lot of people bought the token despite Cronje’s warnings, and most of them ended up losing money. One investor, in particular, put in 1000 ETH in the token, and his stash is currently worth about 80 ETH.
Regardless, a lot of prominent commentators and industry experts have spoken out that, at some point, it becomes unacceptable to deploy experimental contracts, knowing that investors will race to get in while running away from responsibility under the ‘disclaimer’ narrative. On the other hand, there are those who defend Cronje, saying that people knew the risks and are solely responsible for their losses.
Introducing Liquidity Income (LBI) by Andre Cronje
Andre Cronje, the founder of Yearn Finance and its governance token YFI, which skyrocketed to $44,000, started another ‘experiment.’
“Inspired by protocols such as AMPL, YAM, UNI, and SNX, I started playing around with a few new economic concepts. I ended up with a liquidity-based inflationary token that can offset impermanent loss (IL) via liquid governance.” – The official blog post reads.
He also stated that the goal of this project would be to “generate as much trading fees ass possible” and to “offset IL as much as possible.”
To achieve the first goal, Cronje explained that there’s a need for a platform that self promotes arbitrage.
To achieve the second goal, he said that “we need to adequately incentivize liquidity providers via standard liquidity incentive mechanisms.”
Cronje also shared the core contracts of the experiment while also putting an obvious and bolded disclaimer, saying that “these contracts are purely for research purposes and should not be used for any other purpose.” He also said that the entire thing is “100% valueless … this is an experimental concept to be further developed and co-collaborated on.”
He also warned users that it won’t be used in the future and that it doesn’t “do anything more than create a perpetual distribution pool.”
“I promise, I will create things for you to use your funds for, but this is not it.” – He said.
Yet, people are already familiar with what happened to YFI and didn’t want to miss out on a potential moon coin created by Cronje himself. And this is where things went terribly wrong for many investors.
Here Comes The Pain
The price for the token surged from $0.003 to $0.07 in a few short hours, luring many more investors in. After all, it felt like YFI all over again with a quick 2200% increase in a few hours.
Unfortunately, that’s where things turned south as the price tanked to where it started from in a single hourly candle.
One user, in particular, invested 1000 ETH in the new token. For this, he received around 5.36 million LBI tokens, currently worth a little over $21,000 or 56 ETH.
Those For and Those Against
Needless to say, LBI sparked a serious discussion on Crypto Twitter. Still, unlike before, when a lot of people were defending the developers behind ‘experimental’ protocols, this time, the mood is a lot different.
Many well-known commentators and industry experts expressed their views that it’s not tolerable to test in production and run the ‘disclaimer’ narrative.
Crypto proponent loomdart asserted that this is unacceptable, saying that “… at this point, I’m convinced that he’s [Andre Cronje] either 1) insanely stupid and has no idea wtf is going on or 2) insanely toxic and wants people to lose money for his own ego.”
Many agreed, saying that once a user gets more influential, there should be some sort of responsibility.
On the other hand, of course, there are those defending Cronje, saying that it’s entirely up to the individual investor to steer clear of experimental products with clear warning signs.