SushiSwap (SUSHI) is one of the biggest DEXs in the Ethereum ecosystem, which began its history as a fork of Unsiwap and has sparked a revolution in decentralized exchanges.
SushiSwap is a DEX or decentralized exchange, which was born as a fork of the well-known Uniswap, which until now remains one of the largest DEX in the entire ecosystem DeFi built on Ethereum (ETH).
However, SushiSwap has managed to stand out in its own light, as its community has grown considerably. In fact, it has positioned itself very close to Uniswap in transaction volume and total blocked value (TVL) and has even been able to surpass it at some point.
But what does SushiSwap and its token really offer to those who support the project, what advantages does it offer and the best, how can you get the most out of this DeFi platform.
Chef Nomi and the Origin of SushiSwap
The start of SushiSwap is linked to an event that caused quite a stir in the crypto community, when a user named Chef Nomi, decided to make a complete copy of the Uniswap source code, create a new token for its governance and launched the project under the SushiSwap's name on August 26, 2020. As a result, SushiSwap experienced explosive growth that led to more than $ XNUMX billion in value locked within the platform in less than two weeks. This is because its SUSHI token was used to perform yield farming on its platform, something that attracted great interest from investors.
However, there was a lot of controversy surrounding SushiSwap, its launch, its control and the future of the project in its early days. First of all, SushiSwap was just a clone with a new look and higher profit margins than Uniswap. Its second difference was the SUSHI token, which allowed its holders to obtain rewards for their holdings within SushiSwap's lending / borrowing pools. These rewards could be used for governance within the protocol or to be transformed into other tokens. And finally, the fact that its creator, Chef Nomi, had a large amount of SUSHI tokens in his possession from the beginning, something that many saw as a sign of a scam.
This last situation was the most serious of all, and it reached its peak, when Chef Nomi transferred the project to the FTX company, and withdrew with a total of 14 million dollars in his hands. However, on September 11, 2020, Chef Nomi did the least expected: return all that money to the SushiSwap treasury. On his Twitter account, Chef Nomi posted the following:
The event quickly restored confidence in the project and allowed Chef Nomi to demonstrate that his intention with SushiSwap was to create a top-of-the-line DEX for the community. Since then, SushiSwap has run its course hand in hand with FTX, and Chef Nomi finally walked away from the project that started a whole revolution.
How does SushiSwap work?
As we mentioned, SushiSwap is a DEX of the AMM (Automated Market Maker) type, which allows any user within the platform to easily exchange ERC-20 tokens. This means that users can connect to SushiSwap and trade exchanges directly and without intermediaries.
In addition, all liquidity for exchanges is controlled by a liquidity pool (LP) system where the user can lock their tokens in order to earn interest for their contributions. Said interests come from the DEX commission system, where 0,3% is charged for each operation carried out, of which 0,25% is directed to LPs for the reward. On the other hand, SushiSwap generates SUSHI and SLP (SUSHI Liquidity Pool) tokens that are then distributed among LPs and their participants to complement their rewards.
This operating model of SushiSwap initially differs from Uniswap in two points:
- The existence of the SUSHI and SLP tokens, which did not have a counterpart in Uniswap, are a creation of SushiSwap's own.
- The ability to create limit orders within SushiSwap. This is one of the great advantages of the protocol, since, at that time, most DEX only executed market orders (market orders).
SushiSwap vs Uniswap: one start, two different futures
Since SushiSwap started its history as a fork of Uniswap, at first there were no major differences between the two projects, except for the rewards and the existence of SUSHI and SLP tokens. SushiSwap used the same operating protocols as Uniswap, including Uniswap's Constant Product Market Maker (CPMM) protocol, allowing SushiSwap to complete operations quickly by maintaining active pools with the liquidity necessary to meet demand.
However, since 2020 both Uniswap and SushiSwap have evolved a lot. For example, on September 16, Uniswap launched the UNI token, the response to SushiSwap, and its SUSHI token. This simple fact practically left both DEXs at option parity.
The year 2021 marked the starting point to begin to diverge and consolidate as projects with their own values. For example, Uniswap announced on May 5, 2021, the release of Uniswap V3. With this release, the operation of its LPs radically changed and a series of improvements were incorporated over the V2 protocol, from which the SushiSwap fork was made.
For its part, SushiSwap also announced the January 9, 2021 the arrival of SushiSwap V2. This new version of the protocol is expected to be ready by the end of 2021 and will include important improvements, among them we can highlight:
- Trident, A new open-source and decentralized AMM protocol, which allows the process of building AMMs in such a way that the design can be iterated and improved ad infinitum, without the need for redeployment, new versions, or more centralized access.
- DeriSwap improvements aimed at offering improved liquidity and better rewards.
- Boost of BentoBox and its decentralized applications.
- Shōyu, a digital display interface and an NFT marketplace that will allow anyone to mint, expose and sell digital assets. Artists and collectors will be able to display their works within a walkable metaverse in which they are working.
Sushiswap is building a complete DeFi ecosystem with AMM, token launch and trading platform, and NFT artists. This means one thing: SushiSwap V2 and Uniswap V3 are oil and water, leaving behind the battle between two formidable DEX protocols and their gigantic communities.
Staking and Yield Farming at SushiSwap
Two of the operations with which SushiSwap became one of the great DEXs of the Ethereum ecosystem, were its capabilities of staking y yield farming. Staking at SushiSwap is as simple as accessing SushiBar and staking the SUSHI tokens that have been purchased or received from the platform on said platform.
When the user receives SUSHI tokens, he receives a variable reward, which comes from the commissions charged in each of the DEX operations. To be more exact, of the 0,3% charged in commissions, 0,05% of this fee is added to the SushiBar group in the form of LP tokens for the relative group, and from there the rewards are offered to the group.
For its part, the SushiSwap platform also allows yield farming. Then, users who perform staking in some of the farms available within SushiSwap receive an interest for said operation. Interest rates within this option can range from 10% to more than 140%, depending on the tokens in question.
However, it is very important to keep two things in mind before engaging in any of the yield farming options:
- The interest rate is not fixed.
- A high rate can be severely reduced if the farm does not receive investments, and it can even be closed if it does not attract any interest.
In any case, SushiSwap will control all these options using its control mechanism for liquidity pools and the interest of users to inject liquidity into them.
Multi-chain operability
SushiSwap has become the most multi-chain DEX in the entire DeFi ecosystem, with active farming on OKExchain, xDai, Binance, Palm, Arbitrum, Celo, Harmony, Heco, Fantom, Polygon, Moonbeam, Avalanche, and Near.
Other valuable options within SushiSwap
MISO
One of the new SushiSwap projects is MISO. This project is defined as a set of smart contracts designed to allow the launch of new projects within SushiSwap. The idea is to attract new capital within the ecosystem and that this capital serves to create new blockchain projects. In this sense, MISO is a system that seeks to put aside tools such as ICOs, IEOs or IPOs in the world of cryptocurrencies, creating instead a decentralized tool for such purposes.
BentoBox
BentoBox is another SushiSwap project that seeks to allow its users to access decentralized applications while maintaining high efficiency in commissions and at the same time, generating income from their interaction with the dApp. The system works thanks to the creation of a vault that allows to maintain tokens and, through a yield farming strategy, increase the number of tokens in the vault. At the same time, BentoBox makes sure to use flash loan strategies, among others, that maximize value and allow its users to efficiently profit.
BentoBox is not really a scalability solution, and it is not intended to be used across all dApp. However, it is still a curious option within the SushiSwap ecosystem.
SUSHI Token, the economic engine of SushiSwap
SUSHI is the native token of the SushiSwap protocol and its role is vital to the operation of the protocol. First of all, SUSHI allows users to obtain rewards for their participation in both staking and liquidity providers within the platform. In addition to this, the SUSHI tokens are the key in the on-chain governance of the protocol. This is possible because its holders have voting power to decide on the development of the protocol. This latter role will become more relevant once the SushiSwap DAO is rolled out as part of the SushiSwap V2 update.
Regarding the distribution of SUSHI tokens, this is done through liquidity mining. In fact, 60 new tokens are generated on each new Ethereum block, with a dynamic reward reduction every 100.000 blocks.
As a curiosity, Sushiswap has also launched its own totem animal token, Meowshi (MEOW), as a tribute to the frenzy for dog tokens. With a value well below SUSHI, it can always be exchanged for the native token and they promise incentives and profits in the future for their token holders.
Governance of the protocol
Governance over SushiSwap is done through a series of multisig wallets. These wallets can only be opened after giving a vote of confidence on a change. Thus, once opened, they can only make the change expected by the community. This is one of the things that is most often attacked about SushiSwap, since in reality there is no decentralized governance. Instead, a series of individuals are trusted, waiting for the community's decision on some aspect, to make the desired change.
Despite this, the governance of SushiSwap has worked quite well. In fact, the community fully trusts its chefs, which is the name by which those in charge of the development of the project are known. However, this will change radically with the arrival of DAO in SushiSwap V2, where decisions will be made directly among the entire community.
Another curious point of the governance of SushiSwap is the voting system. These votes are made using SUSHIPOWAH, which has a 1: 1 relationship with the SUSHI token, and a 2: 1 relationship with SUSHI-ETH in reserve. To participate in the vote, users must burn their SUSHIPOWAH on the Snapshot platform and decide whether or not to accept a certain improvement.