What is SushiSwap (SUSHI)?
SushiSwap (SUSHI) was created by an anonymous group or individual known as Chef Nomi. This is reminiscent of Bitcoin’s founding, also created by the mysterious Satoshi Nakamoto.
The foundation of the project can be understood through its parent company, Uniswap. Uniswap is a blockchain-based protocol that powers the exchange of Ethereum-based tokens (ERC-20). The protocol emphasizes security, censorship resistance, and efficiency in exchanging ERC-20 tokens.
SushiSwap is a hard fork of Uniswap that adds community-centric features while keeping its parent’s root design. Unfortunately, instead of going its own way, the protocol went out to exploit the original protocol’s liquidity.
On its first day of existence, it raised $ 250 million from Uniswap. Three days later, it sucked about 80% of the liquidity from its parent company.
The ecosystem works divided into two phases; The first phase involved traders staking liquidity pool tokens from Uniswap and receiving SUSHI back. Next, the traders transfer the staked tokens and use them on SushiSwap DEX.
Advantages of SushiSwap
More incentive for liquidity providers
On Uniswap, liquidity providers earn from transaction fees generated on the network. Small liquidity providers run the risk of being overshadowed by giant cryptocurrency exchanges, mining pools and other wealthy providers.
However, its spinoff is likely to make it better by offering more incentives. Here, liquidity providers are rewarded in the form of SUSHI tokens. Providers earn a portion of the transaction fees generated by the system even if they stop offering liquidity.
An elaborate reward system
Initial chains and the fork distribute the same percentage of trading fees but differ in their distribution mechanism. On Uniswap, 0.3% is split equally among the liquidity providers of a pool.
On the other hand, SushiSwap distributes 0.25% of the pool’s transaction fees to liquidity providers. The additional 0.05% is converted to SUSHI and spread to token holders.
Support for security audit
Although the project is new, it seems to have found a lot of remarkable things. For example, it makes recommendations to retain 10% of every token distribution for security audits and continue to grow.
Uniswap vs. SushiSwap
It’s no secret that cryptocurrencies are deeply rooted in the spirit of open source. Many people think that Bitcoin and a growing number of permissionless DeFi protocols act as a new kind of public good in terms of software. Since these projects are easy to be copied and re-launched with small changes, this naturally leads to competition among similar products. However, they can assume that this will ultimately lead to the best products for the end-user.
Without a doubt, the DeFi space has made significant progress for the Uniswap team. But we could see a future where even Uniswap and SushiSwap (or other forks) thrive. Uniswap could remain at the forefront of innovation in the AMM space, while SushiSwap could provide a more feature-focused alternative to the community’s features.
With that said, fragmented liquidity between similar protocols is not ideal. If you’ve read our Uniswap article, you know that AMM works best with as much liquidity in groups as possible. If a lot of liquidity in DeFi is split between many different AMM protocols, that could lead to a worse experience for the end-user.
What is SUSHI Token?
SUSHI is a native token of in Sushiswap ecosystem and is used with the following targets:
- Reward for liquidity mining: SUSHI is used as a reward for participating in liquidity mining at some pools.
- Shared fee for SUSHI miner: With Uniswap, 0.3% of all account transactions in the pool get additional analysis matching the liquidity providers’ group.
- In SushiSwap, 0.25% goes directly to the Liquid Providers who are active in the pool. While 0.05% will be converted back to SUSHI holders.
Sushiswap is formed by a person or a group hidden list known to the Chef Nomi. But, after the scandal “exit scam”, Chef Nomi transferred control of SushiSwap to FTX’s exchange CEO Sam.
SushiSwap is an exciting experiment that challenges the competitive advantage of a successful DeFi protocol – Uniswap. SushiSwap is a fork of Uniswap, with the main difference being community governance.
SushiSwap is a fun experiment, but never deposit more than you can afford to lose. Also, given the extremely high gas costs on Ethereum, smaller deposits may have quite a bit of work to do before they can actually be profitable.
With that said, the SushiSwap developers have invited several audit firms to audit their contracts. Auditing is expensive, but we’ve seen with other community-owned projects like YAM that users are willing to fund audits for initiatives they trust.
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