Hey guys :) I’m back with another comprehensive Q&A piece, this time for the popular decentralized on-chain token swap protocol – SushiSwap (SUSHI).
SushiSwap is a DEX protocol that enables users to seamlessly swap tokens for one another and provide liquidity to earn swap fees and token rewards. As of December 15, 2020, SushiSwap is ranked as the 6th largest DeFi protocol in terms of total value locked (TVL) in its protocol with more than $1 billion locked in.
Now, before we dive in, the following piece is similar to my latest articles on Saffron Finance (SFI), OriginTrail (TRAC), and Numerai (NMR), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is SushiSwap?
- Who and When Created SushiSwap?
2a.How is SushiSwap Governed?
- What is $SUSHI Token Used For?
- How is SushiSwap Different From Uniswap?
- What is the Main Product of Sushiswap?
- What is SushiSwap's BentoBox?
- What is the Yearn Finance & SushiSwap Merger About?
- Where to Store $SUSHI?
- Where to Buy & Sell $SUSHI?
1. What is SushiSwap?
SushiSwap website homepage
SushiSwap is an Automated Market Maker (AMM) decentralized exchange (DEX) protocol built on Ethereum.
It enables ETH and ERC-20 token holders to seamlessly swap between assets in a non-custodial, trustless, and decentralized way and enables liquidity providers to earn swap fees and liquidity mining rewards.
As described above, SushiSwap is very much like Uniswap. In fact, it’s actually a fork of Uniswap that added an ERC-20 governance token, $SUSHI, and a few other innovations which are described in question 4.
Since SushiSwap is a fork of Uniswap, it has many of the same attributes such as the prioritization of decentralization, censorship resistance, and security.
It meets these fundamental pillars by enabling anyone to quickly swap between ETH and any ERC-20 token without having to transfer tokens out of their wallet, hence its non-custodial security.
It meets the pillars of decentralization and censorship resistance by being built on the Ethereum blockchain with its open-source code running across decentralized nodes located all around the world. Also, Sushiswap users are not required to verify their identity and the protocol has no borders, meaning anyone anywhere in the world can use it.
Moreover, in addition to SushiSwap’s primary use case of swapping between tokens, the protocol has a secondary use case that enables anyone to earn the protocol’s swap fees by supplying any amount of liquidity.
This is because token swaps on SushiSwap are facilitated through Automated Market Makers (AMMs) instead of order books and they use liquidity pools. These liquidity pools are funded by anyone who deposits tokens (known as liquidity providers, LPs for short).
LPs can provide liquidity to any pool (ie. market) on SushiSwap and earn a portion of the pool’s swap fees in proportion to the amount of liquidity they provide. Also, LPs can even create their own pools by supplying an equal value of ETH and an ERC-20 token.
All in all, SushiSwap is an incredible DEX protocol that has made a name for itself in the DeFi space. It’s continuously innovating and becoming one of the most successful DEX protocols out there.
2. Who and When Created SushiSwap?
SushiSwap founders, “Chef Nomi” and “0xMaki”
Sushi’s AMM platform launched with a total of $830M in assets transferred from Uniswap to SushiSwap in an initial “liquidity migration” process which incentivized liquidity providers with a SUSHI payout ten times larger than normal.
Within its first week, SushiSwap accumulated more than $1.4B USD in locked funds and rewarded early LPs with SUSHI rewards.
Within the same week on September 5, 2020, Chef Nomi suddenly liquidated over $14M USD of SUSHI tokens which had been accumulated as development funds by the protocol.
In the event of Chef Nomi’s unexpected sell-off, the cryptocurrency community was outraged. The anon Sushi creator received a ton of flak, doxing attempts, and death threats.
Then on September 11, to everyone’s surprise, Chef Nomi apologized to the community and returned the $14M in development funds:
After returning the funds, Chef Nomi stepped down from his involvement with the protocol and handed the reins over to the SushiSwap community.
With this change in power, the SushiSwap community voted to select 9 reputable individuals in the DeFi space to be keyholders for the multi-sig wallet holding SushiSwap’s development funds.
Today, SushiSwap is governed by its community of $SUSHI holders and 0xMaki continues to have an active role in SushiSwap’s development.
How is SushiSwap Governed?
SushiSwap is governed by the community who stake SUSHI-ETH SLP tokens into the sushiswapclassic.org/farms. When staking here, you get 1 vote per 1 SUSHI-ETH SLP token and the votes can be used when community voting takes place.
Once an improvement proposal, protocol change, or upgrade gets voted through, 7 of the 9 multisig signers (which were voted in by the community) must sign the transaction to make it live.
As SushiSwap’s governance process develops, more information and details will be divulged.
3. What is $SUSHI Token Used For?
SushiSwap (SUSHI) token logo
The native cryptocurrency of SushiSwap is an ERC-20 token called $SUSHI and it’s primarily used to reward those who provide liquidity to pools on SushiSwap. An additional use case for $SUSHI is to stake it in exchange for SLP tokens which are used to govern the protocol.
$SUSHI token Use Cases
- Liquidity Mining & SushiSwap Farms
- SushiSwap SushiBar
Liquidity Mining & SushiSwap Farms
SLP tokens are distributed to those who provide liquidity to specific SushiSwap pools. These SLP tokens can then be staked in SushiSwap Farms to generate yield where the rewards are paid out in SUSHI tokens.
SUSHI holders can provide liquidity to the ETH/SUSHI liquidity pool to generate SUSHI-ETH SLP tokens which can be staked in the sushiswapclassic.org/farms to participate in SushiSwap’s governance process through on-chain voting.
SushiSwap’s SushiBar is where you can stake SUSHI tokens to earn more SUSHI tokens. When you stake SUSHI to a SushiBar staking pool, you’ll receive a portion of 0.05% of SushiSwap’s trading fees paid out in SLP tokens. These SLP tokens can then be used to get more SUSHI tokens in the SushiSwap Farms.
4. How is SushiSwap Different From Uniswap?
Though SushiSwap is a fork of Uniswap, the two AMM DEX protocols are actually quite different.
Key Differences Include:
- SushiSwap launched with continuous $SUSHI liquidity mining rewards
- SushiSwap enables staking of $SUSHI to earn more $SUSHI
- SushiSwap features limit orders
For starters, SushiSwap launched with its own native cryptocurrency $SUSHI, which is used to reward liquidity providers and give the community governance rights. Uniswap, on the other hand, didn’t launch with its own cryptocurrency and only launched its $UNI token after SushiSwap and $SUSHI launched.
SushiSwap evolved the Uniswap protocol design through $SUSHI reward distribution + incentives for early LPs. Early LPs received 10x the rewards in $SUSHI for providing liquidity and became significant stakeholders in SushiSwap as a result.
Uniswap didn’t have any of that initially, but they did launch and implement $UNI rewards later. However, their $UNI liquidity mining rewards have already come to an end, while SushiSwap continues to incentivize a ton of pools with $SUSHI rewards.
Another innovative difference SushiSwap implemented was the ability to continue earning swap fees after you stop providing liquidity. They did this by enabling $SUSHI token holders to stake their $SUSHI in SushiBars and receive a portion of swap fees. To this day, this feature isn’t available for $UNI on Uniswap.
SushiSwap is ahead of the curve with its limit orders too. Users can place orders at specific prices for them to fill in the future. Uniswap only features instant market orders.
5. What is the Main Product of Sushiswap?
SushiSwap Quick Swap Interface (Source)
The main product of SushiSwap is its Quick Swap interface where anyone can quickly swap between ETH and any ERC-20 token in a non-custodial, trustless, and decentralized way without having to transfer tokens out of their wallet.
SushiSwap features the ability to quickly swap between tokens and also features limit orders where trades are executed at a certain price that the user sets. If the limit order price is met at some point in the future, the token swap executes at that price.
The Quick Swap interface is also where LPs provide liquidity in any ERC-20 token plus an equal amount of ETH. When providing liquidity, LPs are rewarded with a portion of the protocol’s swap fees in proportion to how much liquidity they’re providing the pool. LP rewards are paid out in LPS tokens which can be redeemed for $SUSHI tokens.
6. What is SushiSwap's BentoBox?
BentoBox is a new lending solution coming to SushiSwap. It will be a cryptocurrency lending platform that employs isolated lending pairs, on-chain and off-chain flexible oracles, liquid interest rates, and contracts optimized for low gas.
The BentoBox solution will enable users on one side to supply different collateral assets, and users on the other side, to borrow another set of assets. Collateral pools with very volatile assets and low liquidity will have a high risk but higher interest rates. Conversely, pools with low risk will feature a lower interest rate.
Also, the interest rates are liquid; meaning the interest rate in each pool will have to be optimized to reach the ideal utilization. If a pool is not being used, its interest rate will drop over time and could even reach 0%, which would then incentivize borrowers to take advantage of this pool.
If a pool is being highly utilized, its interest rate goes up until it becomes unattractive for borrowers and returns to a level of ideal utilization.
With these liquid interest rates, SushiSwap won’t have to manually configure the pools like other lending platforms do to achieve ideal utilization.
Moreover, the BentoBox lending system will utilize an extensive network of oracles through time and contracts will be optimized for low gas usage.
All in all, SushiSwap’s BentoBox lending solution is yet another innovative new product that’s poised to evolve the crypto lending design, just like it did with Uniswap’s design.
7. What is the Yearn Finance & SushiSwap Merger About?
On December 1, 2020, Yearn Finance and SushiSwap entered into a strategic collaboration that will foster the growth of Yearn’s and Sushi’s ecosystem. The two teams will merge their development resources and integrate their liquidity pools to increase the total value locked.
As well, Yearn is now using SushiSwap as the AMM of choice for its yield farming strategies and is creating an xSushi vault to farm SUSHI, Ether (ETH), YFI and Wrapped BTC (wBTC).
In addition to Yearn Finance’s increased integration and collaboration with SushiSwap, Yearn’s ecosystem of DeFi protocols and applications are also integrating with SushiSwap on a deep level.
For instance, Keep3r, a network to perform arbitrary jobs with smart contracts, is moving its treasury to SushiSwap, they’re adding implementations for SushiSwap’s limit and stop-loss orders, and they’re integrating into SushiBar V2.
Also, DeFi insurance protocol Cover will possibly insure SushiSwap liquidity pools; Cream Finance will provide liquidity into SushiSwap’s upcoming BentoBox; and even more integrations and developments are expected in the future.
All in all, Yearn Finance views SushiSwap as a leading DeFi protocol and is collaborating with them in a wide variety of ways to grow their DeFi ecosystems together.
9. Where to Store $SUSHI?
MetaMask wallet website homepage
SushiSwap (SUSHI) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store SUSHI in any ERC-20 token supported wallet.
However, the best wallets for storing SUSHI are non-custodial Web3 wallets that provide seamless access to the best DeFi applications, like SushiSwap, Yearn Finance, Uniswap, etc.
That said, DeFi wallets are the best for storing SUSHI because the token is widely used and supported in the Ethereum-DeFi ecosystem.
Popular SushiSwap (SUSHI) Wallets:
- Trust Wallet (mobile)
- Argent (mobile)
- MyEtherWallet (MEW) (web)
- Metamask (web)
In addition to the above-listed wallets, SushiSwap (SUSHI) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.
9. Where to Buy & Sell $SUSHI?
SushiSwap (SUSHI) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $SUSHI is through centralized and decentralized cryptocurrency exchanges.
You can buy and sell SUSHI with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy SUSHI with BTC, ETH, or stablecoins.
- SushiSwap - WETH, USDT, UNI, YAMV2, USDC
- Uniswap - WETH, KIMCHI, BACON, SHRIMP, YUNO, ABYSS
- Binance - USDT, BUSD, BNB,
- Huobi - USD, USDT, ETH, BTC,
- 0x Protocol - USDC, WETH, DAI, USDT
In addition to the exchanges listed above, SushiSwap (SUSHI) is also traded on a wide variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.