The Origin Story of Boot Finance
Medium Article written for Boot Finance
To know about Boot Finance, one would first have to know about Swerve Finance because their stories are deeply intertwined.
Swerve Finance was facing a real crisis since its inception around September 2020. The team wanted to deploy a contract to start a BTC & ETH pool but they were running out of funds, and perhaps patience as well from both the community and core investors.
Initially, the plan was to approach the investors and committee members to seek funding. The team had been under severe stress with the founder suddenly resigning. All of them had not been paid and had been working for free in Swerve Finance because rewards had dropped off a cliff. There were no tokens assigned to the team, nor a treasury to pay for anything. With the founder leaving, morale sank to an all-time low. One can imagine the sheer number of questions poring through different platforms by users of Swerve, seeking answers that the team themselves might not possess.
The critical moment came for Swerve Finance when the DAO vote to transfer the ownership of the swUSD pool to the Treasury Multisig wallet was proposed. Once passed, this will allow the team to withdraw the much-needed fees accrued in the swUSD pool to perform other administrative functions on the pool contract.
The way the tokenomics worked in Swerve Finance was that users were encouraged to lock in their $SWRV tokens to get better APY. However, there were users who locked their tokens but could not or did not participate in the voting. One of the biggest holders of the token was Harvest Finance. Due to the way they automate their liquidity to the highest yielding farm, they could not vote because their contracts had no way for them to do so.
To attain quorum for significant changes in the DAO, at least 30% of the total tokens locked in had to vote for it. Hence as time passes, with more and more people locking their tokens to secure higher APY in the farms, the minimum number of votes to attain quorum gets higher and higher. This resulted in the decay of the voting power that would have a huge part to play in the gridlock that the team found themselves in.
The first vote failed to reach quorum. The voting power decay was so bad that even if everyone had voted, the vote would still fail to reach quorum. Another roadblock that the team faced was getting everyone to vote. Of the people who locked in their tokens, only 2 out of the top 10 largest holders had voted. The team had to scramble quickly to manually contact the largest holders of the token to do so. But it was ultimately futile. The decay of the voting power was like the proverbial nail in the coffin, sealing the end for Swerve Finance.
“It was just a really sad moment too. Because leading up to the vote, I and whoever else was trying to get up to speed and get the proposal to pass, we had reached out to so many people. And it was… it was just heartbreaking by the end of it, and I did not want to go through the process all over again.”
— Chickenpie
There was a second attempt to re-do the vote and everyone was trying to rally the support of larger holders to do their Swivic duty to cast their votes. However, the attempt fizzled out. The team, understandably discouraged, had wanted to throw in the towel when Chickenpie remembered an earlier conversation with Mick Hagen. Mick is a serial tech entrepreneur and angel investor, currently the CEO & Founder of Genesis Block. He served as one of the valued members of the Swerve Finance community. While everyone was trying to find ways around the quorum issue and canvassing support for people to lock their tokens and vote, Mick suggested starting a brand new protocol with a clean slate.
To an outsider, Swerve Finance must have looked like a sinking ship. There were too many leaks in the hull and water was coming in fast. The 3 major leaks were:
Waning engagement. As people lost confidence in the protocol, engagement with the community was dying out. A vibrant and engaging community is the cornerstone of any good DeFi protocol. Without it, the protocol will become a zombie project.
Voting power decay. The team found it difficult getting people to lock their tokens and cast their votes. Combined with the voting power decay, it just meant that everything was gridlocked. Even a proposal to decrease the percentage of locked tokens to reach quorum failed.
Liquidity providers were leaving en masse. The emission schedule of the $SWRV token had a huge step function occurring in the 2nd week of the project, where 90% of the emissions were set to occur. Initially, it was thought that the scarcity of the token will drive the price up. However, the reality was that liquidity providers jumped ship to other protocols instead.
These 3 major issues conspired to sink Swerve Finance. With the emission scheduled set and unchangeable, the liquidity providers were never coming back. Without the support from the liquidity providers and their votes, changes cannot be made to Swerve Finance. Everything was just locked up and frozen.
It was never just a simple decision of starting a brand new protocol. The matter was complicated by the fact that Lex Moskovski from Swerve Finance and Chicken Pie had given their verbal commitment to return the funds meant for audits with Peckshield back to the audit contributors. This fund is sourced entirely by the community so they felt a deep sense of responsibility to do right by them. The last thing they wanted is to fork Swerve Finance to start a new protocol on a clean slate while leaving the rest of the community stranded behind.
The team consulted Delta Tiger to seek his views on this issue. He was the pseudonymous developer who designed Synthetix’s emission curve and more significantly, he aped early into Swerve Finance because he was excited about the fact that it was 100% owned by the community. He also hypothesized early on that the huge step change function would create a negative feedback loop for the $SWRV token. The whole team had tried to push for a fix but they could not do it in time due to the governance structure of Swerve Finance. Delta Tiger thus agreed with Mick’s suggestion to start a new protocol. One can only imagine the crestfallen looks on the faces of the Swerve team when faced with such a grim prognosis.
There was no way for them to rectify the situation without starting on a new brand. Everyone on the Swerve team had been working for free and nobody was getting paid. There were fees accrued in the pools that would be very helpful for them, but the money was just sitting there because they did not have the votes to unlock it. They lacked external funds, yet their hands were tied because they did not have anything to offer. There was no way to pay the developers because of the lack of ability to mint $SWRV to pay them. Even if all the fees earned from the pools were extracted, it was still insufficient to pay full-time salaries to the existing contributors.
Simply put, it cannot be done.
Some of the earliest contributors and supporters of Swerve finance came together again. With the many lessons learned from the whole episode, they put their experience together to start something new. This was after careful consideration from the inputs of Mick Hagen and Delta Tiger, and not a decision that they had made lightly. As the saying goes, when one door closes, another door opens.
First, the new protocol had to have a name. While trying to come up with a joke AMM and they thought of Saddle Finance. The word associated with Saddle was Boot and since Boot was a 4-letter domain name that was still available, they decided to take it. It might be a little disappointing to the readers that there was no deep philosophical reasoning for naming the new protocol Boot Finance. The name was simply a result of a rather whimsical moment of jest by a group of people bonded by the fate of Swerve Finance.
And just as the phoenix rises from the ashes of its predecessor, Boot Finance will similarly emerge from its troubled past, stronger and wiser.