2020 became the world of DeFi, as the decentralized finance space in the crypto industry expanded and grew at a remarkable pace. More and more platforms have been introduced and one of the most talked-about additions that was made is none other than SushiSwap (SUSHI).
What is SushiSwap?
A relatively new DeFi protocol, SushiSwap is based on the Ethereum blockchain and it is a decentralized exchange (DEX), which boasts an Automated Market Making system (AMM). Similar to how liquidity is added by regulated market makers to both buyers and sellers, an AMM also adds liquidity in smart contracts through several digital assets known as liquidity pools. SushiSwap is often compared with Uniswap, which is another decentralized exchange and regarded as the pioneer of the overall DeFi space. However, it is important to note that there are some differences between the two decentralized exchanges.
In the beginning, Uniswap had been created as an open-source protocol, which enabled external developers in using the code. SushiSwap emerged as Uniswap’s hard-fork, as it used the latter’s core system and redesigned it in order to make it more community-oriented. This allowed it to deliver a better overall performance as compared to Uniswap, as it had better functions and also introduced the Sushi Token.
To put it simply, SushiSwap is a decentralized exchange that’s more community-oriented and all SUSHI token holders can participate in the decision making in different aspects of the project.
The Team Behind SushiSwap
Chef Nomi runs SushiSwap, but it is not clear whether it is an individual or a group of developers, very similar to the case of Bitcoin’s founder, Satoshi Nakamoto. Other people who are also involved in the SushiSwap project are known as ‘0xMaki’ and ‘SushiSwap’. They currently run all business operations and the protocol itself. Sam Bankman-Fried is the only person behind SushiSwap whose identity is known. He is a well-known crypto whale and also founded the DeFi protocol Serum, the FTX exchange and quant trading firm called Alameda Research.
What is the SUSHI Token?
The native token of the SushiSwap exchange is known as SUSHI. It is possible to buy the token on any exchange, such as Huobi or Binance. These tokens are rewarded to the users for liquidity mining. Once they have accumulated a certain number of tokens, they will be granted the ability of voting for every token they hold and this will help them in playing a role in the governance of the overall platform. Apart from that, ownership of the tokens also entitles you to a certain percentage of the trading fees of the protocol.
The Core Products at SushiSwap
The primary products that are available at the SushiSwap platform aim to improve the overall decentralized finance (DeFi) space with products for all the users. Some of these include:
- SushiSwap Exchange: This is the platform where people can trade cryptocurrencies or DeFi tokens.
- Sushibar: This is where people can stake their SUSHI tokens for xSUSHI and then use them in the pool. This involves a fee of 0.3% and around 0.05% of this fee is taken to add it to the SushiBar pool.
- SushiSwap Farms: After you have become a liquidity provider on the SushiSwap platform and have gotten your SLP tokens, you can take advantage of the SushiSwap Farm feature. These refer to staking pools where tokens can be staked for earning additional rewards. After you have selected the pool you wish to use, you will have to approve your SLP token for continuing the process.
- SushiSwap Liquidity Pools: There are seven pools available for traders on the SushiSwap platform. It is possible to change the trading pairs through voting if that’s what the community wants. These pairs began in the 10,750,000 blocks of Etheruem and they are reduced after every two weeks or 100,000 blocks.
SushiSwap Vs Uniswap
While Uniswap is undoubtedly the pioneer, but SushiSwap has managed to enhance a number of features that have helped the protocol in offering better services to DeFi users. Some of the differences between these two leading decentralized exchanges are highlighted below:
- Liquidity: As is the case with most of the DeFi trading protocols in the market, the Uniswap system rewards its users for staking their tokens in the form of trading fees. This happens when they are actively contributing to the liquidity pool. But, they don’t earn any rewards if they withdraw their contribution. In contrast, when you become a liquidity provider on SushiSwap, it means that you are now the owner of a certain percent of that pool and any provider is free to withdraw their tokens and sell them.
- Protocol Fees: Users can earn the protocol’s fee in the form of SUSHI tokens. Even if a liquidity provider wants to retire, they will still be able to get rewards from the protocol. This is one of the top reasons that SushiSwap has been able to make such a strong impact in the DeFi space. It has become one of the hottest platforms for DeFi users and is able to deliver a much better performance than Uniswap.
- Reward System: 0.3% of all Uniswap trading fees is distributed to the liquidity provider, whereas 0.25% of the fee on SushiSwap is given to all active providers and 0.05% is converted into SUSHI tokens and distributed to the token holders.
Risk and Rewards on SushiSwap
On this decentralized exchange (DEX), people can earn rewards by being a token holder as well as an active liquidity provider. If they hold the SUSHI token, they can control the protocol and make decisions regarding its governance. In addition, there is no need to go through a Know Your Customer (KYC) procedure for SushiSwap. This means that anyone can trade in the liquidity pools without having to provide any credentials.
However, SushiSwap has received some criticism as well, like the lack of auditing. Furthermore, the anonymous team behind the protocol doesn’t really provide the users with any security, as a lot of DeFi protocols have suffered from flash loan attacks and other similar problems.