Soviet Finance: The People’s DeFi

Why and how we build Soviet Finance to stop the erosion of DeFi by CEXs and whales.

Soviet Finance

When DeFi projects cold start using governance token yield farming, whales can easily stack up by tapping in early or flooding in massive liquidity, then undermine the governance mechanism to screw small people. The market power divergence is inevitable, but a division between yield generation and governance power vesting mechanism can prevent abuse of voting power.

DeFi — Whose Cheese Got Moved

Before Yearn’s yield farming exploded the market, DeFi has been quietly around for 3 years. It’s understandable as average joes are only following the ‘money effect’, like ICO in 2017 or IEO in 2019. But it’s slightly different this time, as DeFi apps are non-custodial, funds are moved away for the first time from centralised exchanges (CEXs) to lucrative APYs of DeFi protocols. Better yield and no custody, the switching cost is so low that all users are sacrificing just a bit of convenience… CEXs seem to have met their maker.

The Danger of DeFi Governance

However, most DeFi projects suffer from severe flaws, despite marketing themselves as ‘decentralised’, where governance tilts towards the interest of big whales — LPs with massive positions inevitably take the wheel as the control is proportional to coins held. With permissionless yield farming, this could be dangerous when CEXs tap in.

CEX liquidity mining products would substantially decrease the liquidity influx into DeFi ecosystems while coins mined concentrate towards CEXs. As a result, CEX would eventually take control of many DeFi protocols and the fundamental conflict of interest would motivate CEXs to impair DeFis subtly.

Since the APY of yield farming would dilute as whales and CEXs’ funds pumped in, they would tend to vote for more allocation on short term yield and then move on to the next project. Therefore the sustainability of DeFi project can only be achieved when it represents the interest of the ‘proletariat’ who collaborate to keep minimising costs and finding the best risk-yield balanced strategies — just like the situation of Chayanov’s Consumption-labour-balance principle.

How Soviet Deputy Model Help?

Soviet Deputy Model is a DAO governance model of finding the most representative group among the whole Soviet ecosystem. With the name derived from Soviet Union, this mechanism separates tokens from voting power. While whales are still able to pour massive liquidity in and obtain a big share of yield tokens, a weighted average governance token stake-and-mint mechanism will be implemented to advantage the median position holder. Thus, the control of Soviet would remain with the majority of the community. More meritocratic dynamic parameters will be enabled to achieve sustainable governance.

$Soviet’s Fair Launch

There will be no private sale, no ICO, no reserved for Devshare (so expecting no #Chefnomidump). We are building the People’s Vault (named Kolkhoz), which is a non-custodial, easy-to-use all in one yield farming aggregator that puts the community proletariat in control. With the fair launch, we would like to gather the real fund management/risk management geniuses to ensure the ongoing profitability that outcompetes CeFis. Soviet also aims to be an infrastructure that allows future DeFi project to fair launch without repeating the heavy lifting of building yield farming facilities from scratch. Voted projects after passing a community-led security audit and evaluation will be able to leverage on Soviet Kolkhoz to cold-start with ease. Once our $Soviet is live, we will have a UNION full of comrades sharing solidarity. DeFi belongs to the people, not the exploiters.

What’s Next?

If you are a DeFi enthusiast, if you believe CEXs are a day of the past, then you shall join us on:


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Soviet Official:

Chairman of Soviet
Comrade Ivan:

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