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What Is SUSHI?
SUSHI entitles holders to the governance rights and a portion of the fees paid to the protocol. In a simplified way, we can say that the SUSHI community owns the protocol. Why has this spurred so much interest? Well, community governance is heavily intertwined with the DeFi ethos. The growth of liquidity mining (yield farming) as a valid method for token distribution has given rise to an abundance of new token launches.
Those fair token launch models aim to level the playing field for everyone involved, and they often include no premines, little or no founder allocation, and equal distribution based on the amount of funds supplied by each user. In most cases, the tokens distributed also grant governance rights to token holders.
OK, but what can token holders do with these governance rights? On SushiSwap, anyone can submit a SushiSwap Improvement Proposal (SIP), which SUSHI holders can vote on. These can be minor or even major changes to the SushiSwap protocol. Instead of a more traditional team like Uniswap, the development of SushiSwap is in the hands of SUSHI token holders.
A strong community can be a powerful asset for any token project, but this is especially true for a DeFi protocol. MISO, or Minimal Initial SushiSwap Offering, for example, is a product that arose from a governance proposal. It is a token launchpad platform in the SushiSwap ecosystem tailored to meet the expectations of the SUSHI community. MISO allows individuals and communities to
How Does SushiSwap Work?
SushiSwap’s core function is to mirror a traditional exchange by facilitating the buying and selling of different crypto assets between users.
Rather than being supported by one central entity, tokens traded on SushiSwap are maintained by smart contracts, and users lock crypto on the software that can then be accessed by traders.
Of note, those who trade against locked assets pay a fee that is then distributed to all liquidity providers proportionally, based on their contribution to the pool.
Liquidity providers contribute to SushiSwap pools by connecting their Ethereum wallet to the SushiSwap farming software and locking two assets into a smart contract. For example, SushiSwap’s USDT/ETH liquidity pool consists of equal values of USDT and ETH deposits.
Buyers can then swap tokens within the pool based on the protocol’s rules. Smart contracts running SushiSwap take the amount of tokens from the buyer and send an equivalent amount of tokens back, keeping the total pool price constant.
In exchange for maintaining liquidity in these pools, providers are then rewarded with protocol fees, along with a portion of the 100 newly minted SUSHI daily.
Providers can reclaim their funds whenever they wish, along with their “harvest”, which is the cryptocurrency earned from farming.
Users wishing to earn more cryptocurrency after harvesting their SUSHI can make use of the SushiBar, an application that allows them to stake their SUSHI to earn the xSUSHI token, which is composed of SUSHI tokens bought on the open market with a portion of all the fees generated on the exchange.
SushiSwap Governance And SUSHI Token
SushiSwap initially differentiated itself from Uniswap by implementing a decentralized system of community governance. The community governs the protocol and makes major structural changes via forum discussions, official proposals, and community voting. Smaller operational decisions are handled by a pseudonymous SushiSwap developer named 0xMaki and a core team of supporting developers. The platform’s structure, along with its core team, also were voted in by the community. As a relatively new project, SushiSwap’s governance structure is somewhat in flux as it seeks to establish a bonafide decentralized autonomous organization (DAO). While the first iteration of the SushiSwap platform launched within a matter of weeks, its core members anticipate a much longer time horizon to create a DAO.
The cornerstone of SushiSwap’s community governance is its native SUSHI token, which allows holders to participate in voting on platform proposals. SUSHI is an ERC-20 token with a maximum supply of 250 million. Forty SUSHI are minted with each new block — and all 250 million tokens are expected to be minted by November 2023.
Why Is SushiSwap So Popular?
SushiSwap is mainly popular due to its large selection of liquidity pools and its community-focused approach. It is one of the few decentralized exchanges that have sizable liquidity, to the degree of competing with centralized trading platforms.
Traders commonly think of SushiSwap as an alternative for Uniswap. Even though the exchanges are practically the same, many dislike the fact that Uniswap stalls in terms of development. The project has introduced no notable feature since launching the UNI token and its governance model.
On the other hand, SushiSwap creators work hard on delivering innovative features that help the platform stay competitive.
Uniswap VS. SushiSwap
It’s no secret that crypto is deeply rooted in the spirit of open-source. Many think that Bitcoin and a growing number of permissionless DeFi protocols act as new kinds of public goods in the form of software. Since these projects are so easily copied and relaunched with small changes, it’s only natural that this leads to competition between similar products. We could assume, however, that this should ultimately lead to the best products for the end-user.
It’s without a doubt that the DeFi space owes significant advancements to the Uniswap team. But we could see a future where even both Uniswap and SushiSwap (or other forks) flourish. Uniswap might remain at the forefront of innovation in the AMM space, while SushiSwap could provide an alternative that’s more focused on features that the community wants to see.
With that said, fragmenting liquidity between similar protocols isn’t ideal. If you’ve read our Uniswap article, you know that AMMs work best with as much liquidity in the pools as possible. If a lot of the liquidity in DeFi is split between many different AMM protocols, that could lead to a worse experience for the end-user.
SushiSwap Future Developments: Lending
SushiSwap is currently working to develop BentoBox — a lending solution similar to Compound or Aave — which would allow users to deposit digital assets as collateral and borrow other assets against them. With BentoBox, each lending pair is designed to be isolated, as is its risk profile. This model stands in contrast to other popular DeFi lending platforms where users can deposit a variety of assets and borrow several different assets in return, in which case the risk increases with each additional asset involved in the loan.
In many traditional crypto-lending models where a basket of digital assets is used as collateral, the risk that any one borrower presents to the platform is tied to the risk of the borrower’s most unstable collateralized asset. A drop in that asset’s liquidity and/or price might jeopardize the entire loan, and could require the more stable assets in the basket to be sold to pay down the loan. In contrast, BentoBox’s one-to-one structure means that some lending pairs (such as those involving low-cap altcoins) will have higher risk and higher interest rates, while other lending pairs (such as those involving high-cap coins and stablecoins) will have lower risk and lower interest rates.
Further, in alignment with SushiSwap’s community-centric ethos, practically anyone will be able to create a lending pair — leaving the available pairs up to the community’s discretion based on its consensus about which pairs are safe enough to support. BentoBox also aims to implement a significant degree of flexibility — with support for both on-chain and off-chain oracles, liquid interest rates, smart contracts optimized for lower gas fees, and the ability to execute flash loans.
Although SushiSwap’s BentoBox has yet to materialize fully, it has the potential to introduce SushiSwap’s trademark customizability and community-driven nature to the realm of DeFi lending in the future. Another such community-driven plan in the works is the integration of many SushiSwap features and functionalities into the Solana blockchain ecosystem, which would expand SushiSwap’s liquidity solutions to include both Ethereum-based LP tokens and Solana-based LP tokens.
SushiSwap has made, and continues to make, significant and proactive efforts to prioritize the wants and needs of its community. In doing so, the platform has differentiated itself from many other DEXs. With community focus as a primary driver, SushiSwap bolsters the impact its users can have on the protocol’s future while providing permissionless AMM services. Overall, SushiSwap is one of DeFi’s most popular DEXs.
What Problems Does SushiSwap (SUSHI) Solve?
Like Uniswap, SushiSwap’s design helps to alleviate centralization in the market. Users trade directly with liquidity pools and via non-custodial wallets. Consequently, SushiSwap is less likely to get hacked and provides users with more flexibility in terms of coin selection. Keenly, SushiSwap was designed to give the users more control over the AMM and its future developments when compared to the competition.
Benefits Of SushiSwap (SUSHI)
SushiSwap is geared to DeFi users. The platform allows anyone to swap tokens and add liquidity to pools. SushiSwap provides users with multiple ways to earn a passive income with less risk. You can also stake SLP tokens to earn SUSHI and stake SUSHI for xSUSHI and earn rewards.
One of the biggest benefits of SushiSwap is that the majority of fees get paid back to users. Liquidity providers receive large rewards for their added contributions. Impressively, the SUSHI/ETH pool pays out double rewards. SushiSwap is the first AMM to send all profits back to the community that maintains and services it.
SushiSwap fees are more affordable than centralized exchanges like Coinbase. Specifically, SushiSwap users pay a 0.3% fee when they join a liquidity pool. There is also a small transaction fee that is only paid once when you approve a new token’s pool.
The community governance mechanism employed by SushiSwap provides users with a chance to vote on all vital upgrades and protocol changes. Notably, a percentage of all freshly-issued SUSHI is set aside for the future development of the project. The community gets to vote directly on what projects deserve this financial boost.
The crypto market has shown major support for this project since its launch. The platform received glowing endorsements from multiple DeFi platforms. Also, some of the largest centralized exchanges in the world added the platform’s token, SUSHI, days after the project launch publicly. This combination of market and user support helped SushiSwap to gain popularity quickly.
Staking and Farming
SushiSwap offers DeFi users access to the most popular features such as staking and farming. Many new users prefer staking over trading because it’s less labor-intensive and provides more consistent ROIs. Additionally, the farming protocol means you don’t need to be a liquidity provider to earn rewards.
SUSHI Key Metrics
- Token Name: SUSHI Token.
- Ticker: SUSHI.
- Blockchain: Ethereum.
- Token Standard: ERC-20.
- Contract: 0x6b3595068778dd592e39a122f4f5a5cf09c90fe2
- Token type: Utility token.
- Total Supply: Unlimited.
- Circulating Supply: 192,789,256 SUSHI.
SUSHI Token Allocation
At present, SUSHI is distributed through Liquidity Mining (Yield Farming). That means when supplying liquidity to Uniswap pools, users can earn SUSHI tokens as mining rewards.
- From Ethereum block 10,750,000, by providing liquidity to specific Uniswap pools, users can deposit Uni tokens to earn SUSHI. The rewards lasted 100,000 blocks (roughly 2 weeks)
- After that, 4 million SUSHI tokens are weekly distributed in liquidity pools on SushiSwap
- 10% of total mined SUSHI tokens are transferred to the Development Team.
SUSHI Token Release Schedule
When mining SUSHI, users are free to withdraw SUSHI tokens with a slight amount of Gas Fee.
SUSHI Token Sale
Sushi doesn’t have any token sale program, the only way to earn SUSHI tokens is to provide liquidity to pools. However, in July 2021, Sushi proposed to sell a number of SUSHI tokens to Venture Capitals that caused several controversial discussions in Sushi’s community.
SUSHI Use Cases
Rewards: Everyone with ERC-20 tokens including the SUSHI token can add liquidity to pools. Liquidity providers have to deposit both tokens of the token pair with a ratio 1:1. As a result, they earn 0.25% of transaction fees in SUSHI tokens and Sushi Liquidity Provider tokens (SLP).
Sushi Liquidity Provider token (SLP): When staking SLP tokens in the Osen pools which are organized by the SUSHI incentive program named Osen, users are rewarded with SUSHI tokens.
Governance: SUSHI is a utility token and xSUSHI is a governance token, that means xSUSHI holders are able to participate in voting decisions on upgrades and future changes on the Sushi platform. By staking SUSHI locked for 6 months, Liquidity Providers are rewarded with xSUSHI. The indispensable advantage of xSUSHI is that holders are rewarded with 0.05% of Tx Fees.
Lending/Borrowing: Sushi’s lending platform is Kashi Lending, a product of Bento Box. Bento Box is like a vault storing tokens to earn yield and use its services such as Kashi Lending and Synthetic Assets. Kashi Lending uses Isolated Lending Pairs that allow users to borrow from separated pools. As a result, instead of having all liquidity in one pool, Kenshi Lending has multiple isolated pools in order to reduce the chance of all pools getting hacked at the same time.
Launchpad: Sushi’s IDO platform called MISO is for startups launched on the IDO platform to attract support from the crowded Sushi community. Therefore, SUSHI tokens are demanded to participate in future token sales.
How To Get SUSHI Token
You can get SUSHI by buying the token on CEXs/DEXs:
- DEXs: Sushi, Pancakeswap, Uniswap, etc.
- CEXs: Binance, Huobi, OKEX, etc.
SushiSwap’s Unique Features
Apart from a few new features, SushiSwap works mostly the same as Uniswap. If you know how one DEX works, you will find it easy to use the other one as well.
SushiSwap’s core features are token swaps and yield farming. Token swaps are for trading, while yield farming is for earning interest on existing assets. If you have been browsing Crypto Twitter for more than 5 minutes, you probably know what these two concepts are. Instead of regurgitating information, we will discuss the newer features that SushiSwap uniquely offers.
Onsen (Menu of the Week)
Previously, the exchange offered menus that change every week. Why is that even a thing? Yield farmers, being the cash-lovers they are, would constantly search for new LP opportunities. Usually, they would have to switch back and forth between different platforms to farm on the most profitable pool.
Since the profitability of a pool frequently changes, especially with the arrival of new users, the team thought of introducing a ‘menu of the week.’ Governance participants could vote on which LPs to feature every week, which in return helped with changing the protocol’s variety and token offering.
Later, the community approved the Onsen sub-section that effectively replaced the weekly menus. Onsen pools are different exclusively in terms of lasting longer and featuring more pairs at a time. In total, LPs on Onsen last for 60 days and feature 58 liquidity pairs.
According to the team, Onsen’s design enables it to bring new liquidity to the DEX while at the same time decreasing slippage, expanding LP offerings, and creating synergic relations with other projects in DeFi.
Onsen has a cap for projects based on their market cap:
- Gem (1M to 5M market cap) – A maximum of 20 trading pairs
- Lowcap (5M to 25M market cap) – A maximum of 25 trading pairs
- Midcap (25M to 100M market cap) – A maximum of 13 trading pairs
In 2021, Sushi published a detailed plan to improve and create multiple new features and products that can benefit the Sushi community.
AMM v2: Sushi plans to upgrade to AMM v2 which has delegated pools and many other features.
New Domain with IPFS: SushiSwap changed its domain name to show the future direction that they are focusing on: not only on AMM DEX but also on other products.
Governance: Sushi aims to get the Governance Process by the end of Q4 2021.
Onsen: Sushi wants to support startup projects to flourish on SushiSwap by introducing them to the Sushi community.
- 0xMaki is an anonymous core contributor and founding member of SushiSwap.
- Joseph Delong is the Chief Technology Officer at SushiSwap.
- Other members of SushiSwap remain anonymous.
Sushi is now one of the largest decentralized exchanges in the world of De-Fi in terms of market share. They have huge support from the community as well as many supports from other organizations for instance:
Sushi X Harmony Partnership: In Jun 2021, to reduce transaction fees and to increase the transaction speed, Sushi and Harmony now joined hands to deploy SushiSwap natively on Harmony. They launched a $4 million dollars incentive campaign for liquidity mining rewards, hackathon programs, and other financial services
Is SushiSwap (SUSHI) A Good Investment?
Overall, Sushi is a very strong competitor in the DeFi space. There are a few notable points that you should take into consideration before making any investment decisions:
- No KYC which means only a decentralized wallet is required to do transactions.
- Earn passive income on SushiSwap by providing liquidity.
- Sushi’s ambition is to dethrone Uniswap which is now leading the DEX market.
Sushi not only provides users the swapping service but also has an ecosystem behind it as in the following picture:
Sushi has an indispensable potential in the future with all mentioned key advantages. But this is not financial advice. As a result, a solid understanding of the Sushi project will help you make investment decisions that are profitable in the long run.