Umami attempts comeback with Maker-style transformation

An Arbitrum-based protocol is embarking on a MakerDAO-style transformation more than a year after it weathered a crisis from which it never fully recovered.

The digital cooperative formerly known as Umami DAO has rebranded as Bonsai, a “meta DAO” that will house several, smaller cooperatives, or “subDAOs,” each of which will manage a separate blockchain-based financial product.

The move echoes a recent push from MakerDAO, whose own yearlong transformation, known as “Endgame”, includes the creation of subDAOs.

Each subDAO will eventually launch its own token, according to Bonsai.

Among other things, the strategy will test whether the promise of successive airdrops can boost a long-running protocol long after a flurry of negative headlines.

Umami’s governance token has jumped 11% since the April 24 rebrand.

“It hasn’t exactly been smooth sailing for Umami,” developers behind the project said in an April 2 blog post announcing the changes.

“It is our firm belief that Umami’s token is severely undervalued, and that significant change is required to shift the narrative and regrow the passion and excitement around our amazing community.”

Near collapse

In February 2023, Umami, a protocol-and-LLC combo attempting to link institutional investors and the world of decentralised finance, almost came apart.

The company, Umami Labs, paused the protocol’s staking rewards, angering users. Employees resigned en masse, pledging to continue contributing to the project as Umami DAO contractors.

The UMAMI token crashed: At the end of January 2023, it was trading above $35, but by mid-February, it was worth less than $10.

The DAO, run by people who held the UMAMI token, voted to hire Umami Labs’ former employees as contractors who answer to the DAO. They included all former employees except for the Umami Labs CEO, former Reuters journalist Alex O’Donnell.

In a statement after the vote, Umami Labs’ former employees said O’Donnell “was moving the company in a direction that the entire team unanimously agreed was not in keeping with the expectations or best interests of the UMAMI token holder community.”

O’Donnell didn’t immediately respond to DL News’ request for comment.

The Umami DAO has soldered along since, restarting staking rewards and releasing new “set-and-forget” vaults that have generated some of the best returns on Ether this calendar year.

But the UMAMI token has steadily fallen since July, and was trading at $3.70 before the announcement of the rebrand. While growing in dollar terms because of the appreciation of Ether, deposits in the protocol have been flat since March 2023, according to data from DefiLlama.

Trying to boost adoption

On Discord, Umami developers say they have taken some cues from other protocols that feature subDAOs, including Maker, Aladdin, and Magpie.

The rebrand was prompted by frustration that a product generating a relatively high yield for users hadn’t attracted more deposits.

“We launched a great vault product, it has hit $10m TVL and still the token hasn’t moved from $4,” the project’s pseudonymous head of community management said on Discord, using the acronym for total value locked.

“So we might as well try something new, the 10% APR a year at this price should be nothing in comparison to like 3-4 or more airdrops of new products on new chains.”

In a bid to boost adoption of its new governance token, BONSAI, the DAO is letting users convert their UMAMI tokens to BONSAI at a 1:10 ratio.

Under its new structure, so-called “leaves” are DeFi applications that will eventually be run by their own subDAOs.

“Once independent, they have a [token generation event] and reward $Bonsai holders and initial users by airdropping a significant portion of their tokens,” Bonsai said on X.

Umami will be an exception, and is not expected to evolve into a subDAO, developers said.

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can reach him at aleks@dlnews.com.