SushiSwap is an Ethereum-based, community-owned, and community-run decentralized exchange (DEX) that allows users to swap tokens, earn rewards via yield farming, and more.
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Read on to learn everything you need to know about the SushiSwap project and the SUSHI token.
What Is SushiSwap
SushiSwap is an Ethereum-based Automated Market Maker (AMM) and yield farming protocol. It allows users to trade digital assets directly with each other without a centralized intermediary or a need to provide identifying information.
Instead of an order book, SushiSwap uses the automated market-making (AMM) model, which leverages smart contracts to create and manage liquidity pools of tokens that users can then tap into to swap cryptocurrency assets. The AMM model allows users to trade a vast array of tokens and earn yields in the form of trading fees and SUSHI tokens without relying on any intermediary.
The DeFi protocol emerged as a fork of the popular decentralized exchange UniSwap. It was launched in August 2020 with an open-source code so that SushiSwap developers could add several improvements. SushiSwap protocol better aligns incentives for network participants by introducing revenue-sharing & network effects to the popular AMM model.
The platform's initial liquidity was ported from Uniswap using a very creative, novel, and somewhat ethically questionable method dubbed a vampire attack.
SushiSwap offered enhanced incentives to liquidity providers (LPs), and over 90% of some Uniswap pools' liquidity was transferred to SushiSwap. It applied a method dubbed "vampire attack," a successful yet somewhat ethically questionable strategy, resulting in the platform's initial liquidity being ported from Uniswap.
SUSHI Token
SushiSwap gave users control over the platform and a fair share of the exchange's profits through SUSHI, SushiSwap's native token.
SUSHI entitles token holders to governance rights. They can vote on protocol improvement proposals, UI/UX updates, set the yield farming fees, vote on how the treasury devfunds (development funds) are used, etc. Holders can also stake the token and receive rewards.
SUSHI is an ERC 20 token. It was launched without holding Initial Coin Offering (ICO). SushiSwap adopted the "fair launch" approach to distribution, which meant no token allocation for venture capitalists.
There was no pre-mine for SUSHI tokens. It started with zero supply and began being minted at Ethereum block number 10,750,000. In 2 weeks, 1000 SUSHI were minted per block to incentivize early adopters of the protocol.
The model changed in September 2020, when the SUSHI community voted to gradually reduce the amount of SUSHI minted each block until it reaches a max supply of 250 million SUSHI in 2023.
SushiSwap Founders
SushiSwap was founded by pseudonymous Chef Nomi and OxMaki (aka Maki). Initially, the founders carried out the development and business management of the protocol.
Soon after its release, Chef Nomi stepped down from the project due to controversy. When the SUSHI token was breaking new all-time highs, Chef Nomi decided to sell all of their SUSHI, worth around $14 million, which singlehandedly crashed its price by nearly 50%.
The community lost faith in Chef Nomi and effectively forced Nomi out of the project. The control of the project was transferred to Sam Bankman-Fried, head of Alameda Research and centralized derivatives trading platform FTX. After finalizing the liquidity migration, Sam moved the admin key's control to a multi-signature wallet managed by nine individuals chosen by the community.
They were:
- Sam Bankman-Fried
- SushiSwap co-founder Maki
- Founder and CEO of interest rate protocol Compound Finance Robert Lesher
- VP of research at the news platform the Block, Larry Cermak,
- CEO at blockchain investments company Sino Global, Matthew Graham
- CEO at digital banking company Genesis Block, Mick Hagen
- Creator of SushiBoard Zippo
- Crypto trading firm CMS Holdings
- Business development and marketing executive Adam Cochran
Soon after the successful migration, Chef Nomi returned, bought the same amount of SUSHI tokens he sold, put them all back in the devfund, and apologized to the community.
In September 2021, Maki announced moving from day-to-day operations and starting to participate in the protocol's development as an advisor.
How Does SUSHI Work
SushiSwap is built on an automated market maker (AMM) system which uses smart contacts to complete transactions. Tokens are provided by other users via liquidity pools. Other SushiSwap users lock up their funds in token pairs to these pools, which provides the funds needed to complete swaps. Those users are then rewarded with a small percentage of fees generated by trades in a process called yield farming.
SushiSwap allows users to swap different cryptocurrencies. The protocol charges 0.3% in fees for each swap, with 0.25% going to each liquidity provider and 0.05% being converted to SUSHI and distributed to token holders.
To provide liquidity, users need to connect their crypto wallet to the SushiSwap account. They can convert their tokens to SUSHI and lock them into a smart contract through the Swap function.
It's also possible to supply liquidity for trading pairs that don't exist by providing assets for the new pools. The first LP sets the initial exchange ratio, which will likely correct itself as others add tokens to the pools through arbitrage. Arbitrage makes certain that prices correspond to the fair market value for long periods. The deposited token pair must have an equivalent value. If not, arbitrage traders will add one token to the pool and remove the other until the ratio mirrors the current price.
Network participants supplying cryptocurrencies to a liquidity pool will receive SushiSwap Liquidity Provider tokens (SLP). SLP tokens represent a proportional share of the pooled assets and allow users to reclaim their funds and any crypto fees earned at any time.
SushiSwap cooperates with several DeFi projects to offer more opportunities. The protocol's partners are Yearn Finance, Harmony, Cream Finance, Aave, Pickle Finance, Akropolis, and Keep3r Network.
In early October 2021, Shoyu, SushiSwap's NFT marketplace, went live. The team plans to make Shoyu a marketplace & play-to-earn gaming environment like Axie Infinity and Decentraland. SUSHI holders will gain rewards from Soyu transactions.
SushiSwap's 2021 roadmap includes launching the BentoBox lending platform. The DEX will use Moonbeam, a Polkadot parachain designed for developers that combines full Ethereum compatibility with the power of Polkadot. It will allow SushSwap to build integrations using cross-chain integration features on Polkadot and make more assets accessible to its platform.
As of October 2021, there are over 150.000 Sushi token holders.
Where Can You Buy SUSHI
SushiSwap is one of the most popular DEXes, and you can find its native token SUSHI on various trading platforms. Among centralized exchanges where you can trade the token are Coinbase, Binance, Gemini, Kraken, and others. Decentralized exchanges that support SUSHI trading are 1inch, Uniswap, etc.
Various factors have an impact on the SUSHI price. Among them are the project's development upgrades, general market trends, and the demand for the token.
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