Throughout 2020 and the beginning of 2021, the DeFi space could be summarised in two words: food fight. Indeed, it truly felt like a new ridiculous food-themed DeFi protocol was being added to this culinary carnage every other day. One of the most sought-after DeFi delicacies? Sushi, of course!
For most crypto enthusiasts, the introduction of SushiSwap signaled that DeFi had officially gone too far. In fact, the controversial events surrounding the project which unfolded in the short weeks after its release, pretty much spoiled the appetite of many in the DeFi space.
However, there is much more than meets the eye (or the nose) when it comes to SushiSwap. The initial 2,500%+ APYs on deposited funds were just the tip of the tilapia. At one point, in late 2020, SushiSwap was actually the largest DeFi protocol on the market and, according to DeFi Pulse, SushiSwap currently stands in 8th position for Total Value Locked (TVL) in DeFi with almost $4 billion in assets on its platform.
In September 2020, the SUSHI token successfully listed on Binance and control over the project was transferred from the original, anonymous founders to FTX CEO Sam Bankman-Fried, an incredibly reputable individual in the crypto space. Thus, by the end of this article, you will know why SushiSwap may just deserve a Michelin star.
Who Founded SushiSwap?
SushiSwap was founded by two anonymous developers named 0xMaki and Chef Nomi. On August 26 2020, Chef Nomi released a Medium post detailing the SushiSwap protocol. This enticed 0xMaki to join the SushiSwap Discord.
Being one of the first participants, 0xMaki spoke at length with Chef Nomi and consequently became the co-founder of SushiSwap. It is believed that there were around 5 developers working on the project in total at the time of release.
While not much is known about 0xMaki or Chef Nomi, in a recent interview 0xMaki confirmed that Chef Nomi is based somewhere in Asia. The fact that the Hearthstone card game from which the Chef Nomi pseudonym comes from is popular in China, this suggests Chef Nomi could be Chinese.
Given 0xMaki’s French accent, appearance, and time-zone hint, he is likely based somewhere in France or a French-speaking Middle Eastern country. 0x is in reference to the starting number and letter of all Ethereum addresses, and Maki is a popular sushi dish.
SushiSwap’s Fishy History
In addition to being created by two anonymous developers, SushiSwap was not audited prior to release. That being said, Chef Nomi openly invited some of the most reputable companies including Quanstamp and Consensys to audit SushiSwap’s code in the first Medium post about the project.
Within the first week of its release, SushiSwap had accumulated over 1 billion USD in locked funds and temporarily surpassed Aave as the largest DeFi protocol. Interest rates on locked funds exceeded 2,500% APY!
On September 5th, Chef Nomi suddenly liquidated over 14 million USD of SUSHI tokens which had been accumulated as development funds by the protocol. In a series of Twitter posts he noted he felt entitled to the funds. This drew immense outrage from the cryptocurrency community, most notably yearn.finance creator Andre Cronje.
Popular YouTuber Ivan on Tech also weighed in and remarked that “[SushiSwap] is just as bad as real sushi”. Ivan also noted that the sudden sell-off of SUSHI likely caused a crash in the cryptocurrency market the next day due its effect on the entire DeFi Space.
Chef Nomi subsequently stepped away from Sushiswap and handed it to Sam Bankman-Fried, the CEO of the FTX cryptocurrency derivatives exchange. Andre Cronje had also been considered by the SushiSwap developers to be the new defacto leader of the protocol.
The SushiSwap community voted to select 9 individuals in the DeFi space such as Compound Finance’s founder Robert Leshner to be keyholders for the multi-sig wallet holding SushiSwap’s development funds.
On September 9th, Uniswap was stripped of its title as the largest decentralized exchange when SushiSwap users migrated over 1.14 billion USD of Uniswap’s 1.9 billion USD locked cryptocurrency assets to the new SushiSwap platform.
Though this migration had been planned since the protocol’s announcement, 0xMaki believed that no more than a few hundred million dollars of cryptocurrency would be moved. This sudden transfer of liquidity from one protocol to another has been dubbed a vampire attack.
On September 11th, Chef Nomi suddenly returned the stolen development funds to SushiSwap. Some believe this was done to draw more attention to the project. However, in the aforementioned interview with 0xMaki, he noted that he had issued an ultimatum over Twitter to Chef Nomi telling him to answer his messages or else he would reveal sensitive details about SushiSwap (likely Chef Nomi’s true identity).
Chef Nomi is no longer involved with the protocol and now describes himself on Twitter as the “former head chef” at SushiSwap.
What is SushiSwap?
SushiSwap is a decentralized cryptocurrency exchange build on the Ethereum blockchain. It aims to be an evolution of Uniswap, the most popular Ethereum-based DEX on the cryptocurrency market. It is almost identical to Uniswap in both appearance and function.
SushiSwap rewards those who deposit cryptocurrency to provide liquidity to the protocol with SUSHI, an ERC-20 token given to liquidity providers on SushiSwap which can be used for governance of the protocol.
Although SushiSwap has a controversial history, it was and continues to be heavily community-driven and committed to the open source of ethos of cryptocurrency. All smart contracts and code are easily accessible by anyone via SushiSwap’s GitHub and Medium posts.
SushiSwap has also been audited by PeckShield and reviewed by Quantstamp. SushiSwap borrows much of its code from other popular DeFi protocols including Uniswap, Compound Finance, and the infamous Yam Finance.
SushiSwap vs. Uniswap
With SushiSwap being a Uniswap fork, both DeFi protocols consequently share architectural and aesthetic similarities, however, there is one critical element of difference that should be noted here, and that is an issue present in Uniswap that SushiSwap actually does not have.
Liquidity providers (LPs) earn a cut of the trading fees on both protocols. In Uniswap, the more liquidity someone provides, the larger the cut of the trading fees from the pool they will get. The consequence of this is that rewards to smaller liquidity providers become diluted as the pools grow. Large entities such as cryptocurrency exchanges, mining pools, and venture capital funds can and often do get the lion’s share of these trading fees as a result.
Conversely, SushiSwap designed its SUSHI emission in such a way that early adopters of the protocol would receive 10x the amount of SUSHI as those who join the protocol later. This SUSHI could be used to get a cut of trading fees from all pools even if the early adopters stopped providing liquidity to pools (more on this later).
How Does SushiSwap Work?
Like many other DEXes, SushiSwap fundamentally consists of several asset pools. Each pool contains 2 assets, such as ETH and LINK (Chainlink). This is because it uses an automated market maker, a smart contract which uses the ratio between two assets in each pool to determine their price.
We covered automated market makers in detail in our recent article about Curve Finance and recommend you head over to read that section first if you are not familiar with AMMs or how they work.
When SushiSwap was initially released, it focused around Uniswap LP (liquidity provider) tokens. LP tokens on Uniswap are ERC-20 tokens issued to liquidity providers when they deposit assets into pools on Uniswap.
These tokens can be exchanged for the underlying deposited funds, used in other DeFi protocols, and even exchanged for other LP tokens. Liquidity providers also receive a share of the trading fees of the assets in the pools they provide liquidity for via the LP tokens.
What SushiSwap did was to reward liquidity providers on Uniswap for staking their Uniswap LP tokens on the SushiSwap protocol. Their reward? SUSHI tokens! During the first 2 weeks of the protocol’s launch, 1000 SUSHI tokens were being issued every Ethereum block (~12 seconds) to users who staked their Uniswap LP tokens into a variety of comedically named “pools”.
Given the high market valuation of SUSHI at the time, interest exceeded 2,500% APY per year in many of these pools. The highest returns were (and continue to be) from the Sushi Party pool, which gave an additional 2x reward in SUSHI for staking Uniswap LP tokens for the SUSHI-ETH pairing.
At the end of the two-week period, The Liquidity Migration ™ occurred. This saw all the Uniswap LP tokens automatically sent back to Uniswap to redeem them for the underlying crypto and send it all to SushiSwap’s new pools. This is the event which drained over 1.14 billion USD from Uniswap within 24 hours.
After this, SushiSwap effectively became a carbon copy of Uniswap with additional features. SUSHI rewards were also reduced to 100 SUSHI per block. SushiSwap as it is currently built consists of the following menu of applications: the SushiSwap Exchange (Swap), SushiSwap Liquidity Pools (Pool), SushiSwap Farming (Farm), Lending (Lend), Borrowing (Borrow), Staking (Stake) and Minimal Initial SushiSwap Offering (MISO).
In terms of governance, SushiSwap is ultimately run and governed by its community through forum discussions and voting proposals held on the SushiSwap Snapshot. All major infrastructural changes and use of the development fund wallet are voted on by the SushiSwap community, whereas smaller changes affecting operations and farming pairs are decided on by 0xMaki and the SushiSwap Core Team.
The SushiSwap Exchange lets you easily swap between 100+ ERC-20 tokens. As with Uniswap, no KYC is required to use the SushiSwap exchange. All you need is a Web 3.0 wallet such as Metamask and some Ethereum to pay gas fees to execute swaps.
Trading fees on the SushiSwap exchange are 0.3%, the same as Uniswap. 0.25% of these fees go to those who are providing liquidity in SushiSwap’s Liquidity Pools and the remaining 0.05% goes to the Sushi Bar pool (more on that in a second).
SushiSwap Liquidity Pools
After The Liquidity Migration ™, SushiSwap introduced “formal” liquidity mining pools. Liquidity providers could earn the 0.25% cut of trading fees on the platform by depositing equal amounts of two cryptocurrencies into an existing pool on SushiSwap or by creating their own pool.
Liquidity providers are given SushiSwap Liquidity Pool tokens (SLP tokens) which have the same features as Uniswap’s LP tokens. As you may have guessed, these are the tokens which are now used in lieu of Uniswap’s LP tokens to yield farm.
SushiSwap’s Menu contains the former yield farming “pools” found in the initial release of the protocol. However, instead of Uniswap’s LP tokens, SushiSwap’s own SLP tokens are staked to earn varying amounts of annual interest. And besides pure SUSHI token farming, SushiSwap actually offers a wide array of farming opportunities to its users, including a great variety of asset pairs with different risk levels and APYs.
Users looking to farm on SushiSwap should:
- Head over to Sushi.com.
- Click ‘Enter App’.
- Connect Metamask Wallet.
- Click ‘Farm’.
At this stage, farmers will be able to see all the available farms on the SushiSwap platform through the ‘All Farms’, ‘Kashi Farms’, ‘SushiSwap Farms’ and ‘2x Reward Farms’ Tabs.
Once the preferred Farm is selected, users will subsequently need to click ‘Stake’, to initiate the farming process, or ‘Unstake’, to withdraw funds.
- After entering the desired amount and having clicked on ‘Stake’, users can then preview their selected asset pair for the respective farm and confirm the transaction on Metamask. ETH will be required to settle the transaction.
Currently, depending on the asset pair and farm, APYs can vary drastically from approximately 7% to more than 600%, which is of course representative of the risk exposure undertaken by farmers at any one time. For instance, the DAI-Aave Kashi Farm returns farmers 639% APY, but because its Total Value Locked (TVL) is so low, due diligence and proper risk management should be thoroughly exercised.
SushiSwap SUSHI Bar (Stake)
SushiSwap’s Sushi Bar is where you can stake SUSHI tokens to earn more SUSHI tokens. If you are wondering where these rewards come from, recall the 0.05% trading fee noted earlier. 0.05% of all trading fees on SushiSwap are added to the Sushi Bar pool in the form of SLP tokens.
At least once every 24 hours, the rewards contract can be called which liquidates all SLP tokens in the Sushi Bar pool in exchange to automatically buy SUSHI tokens on the SushiSwap Exchange. These tokens are then distributed to all users staking SUSHI tokens in the Sushi Bar in the form of xSUSHI tokens, which can be converted into regular SUSHI tokens in the Sushi Bar.
Minimal Initial SushiSwap Offering (MISO)
MISO is a suite of open-source smart contracts created to ease the process of launching a new project on the SushiSwap exchange. The Minimal Initial SushiSwap Offering acts as an IDO-like launchpad for SushiSwap, and is a place for token creators and communities to launch new project tokens. Through MISO, SushiSwap aims to create a launchpad for both technical and non-technical project founders, which will allow communities and projects access to all the options they need for a secure and successful deployment to the SushiSwap exchange.
MISO creates a collection of out-of-the-box smart contracts for non-technical founders to choose over more traditional and code-oriented methods of token launching. At present, SushiSwap’s MISO launchpad is offering a selection of NFT assets to investors through an auction system to celebrate the launch of new tokens on its platform. Thus, MISO is a clear indication of SushiSwap’s forward-thinking, cutting-edge architecture as it seeks to encapsulate both the hype-driven world of NFTs and the economic potential of IDOs into its ecosystem.
The SushiSwap team is currently developing a governance framework called Omakase DAO which will handover control of the protocol to the community. Anyone with SLP tokens received from providing liquidity to the SUSHI-ETH pool or those with xSUSHI tokens (which also require SUSHI-ETH SLP tokens to get) will be able to vote for changes to SushiSwap.
Although the details are still being hammered out, it is anticipated that you will need to stake these tokens for a fixed amount of time to participate in voting.
For the time being, SushiSwap Improvement Proposals (SIPs) can be tabled and voted on by anyone in the SushiSwap’s SushiPowah page on Snapshot. For those unfamiliar, Snapshot is a publicly viewable governance forum used by DeFi protocols such as Aave, Balancer, and Yearn.Finance.
With SushiPowah, each SLP token for the SUSHI-ETH pool is equal to one vote for or against the proposal, with 300 000 SLP voting in favor plus a 50% quorum to pass and enact the proposed change which must be signed off by all nine multi-sig key holders.
The SUSHI Token
SUSHI is an ERC-20 token issued to liquidity providers (LPs) on the SushiSwap decentralised exchange (DEX). It is earned by providing liquidity to pools on SushiSwap or through staking in exchange for SLP tokens which are used to govern the protocol.
The token was designed to reward early users of the protocol by allowing them to continue earning a cut of SushiSwap’s fees even after they have stopped providing liquidity to SushiSwap’s pools. This can be done by staking SUSHI to earn more SUSHI on SushiSwap’s Sushi Bar.
There was no ICO for SUSHI. The issuance of SUSHI began on Ethereum block number 10750000 . As mentioned previously, 1000 SUSHI were being issued every Ethereum block (12 seconds) to those staking Uniswap LP tokens on SushiSwap’s initial protocol.
After The Liquidity Migration ™ occurred, SUSHI rewards dropped to 100 SUSHI per Ethereum block. This may be reduced by community vote. At the time of writing, the circulating supply of SUSHI equates to 192,789,255 SUSHI tokens, with a maximum supply of 250,000,000 SUSHI.
SUSHI Price Analysis
As you might have guessed, SUSHI entered the cryptocurrency market on August 28th with near-zero value. However, by September 1st the price had skyrocketed from a few cents to over $12 as yield farmers rushed in to capitalize on the insane annual percentage yields offered by SushiSwap.
Just one day later the price crashed by over 50% to under $6, and again dropped by more than 50% on September 5th to around $2.50 when SushiSwap’s co-founder Chef Nomi liquidated over 14m USD worth of SUSHI.
SUSHI is currently trading at approximately $9 and is down about 57% from its March ATH. As one of the largest DEXes in the DeFi space with a proven use case and over $4 billion in TVL, SushiSwap should face no major difficulties in reacquiring its previous $20+ ranges in the medium-term outlook. Inherently, SushiSwap has so much going for it, and it will most likely carry on growing alongside the rest of the Decentralised Finance ecosystem.
Where can I get SUSHI cryptocurrency?
SUSHI is almost just as easy to get as real sushi. Binance listed SUSHI on September 1 2020, which likely caused the incredible spike in price at the time. Since then, other reputable exchanges including Huobi and OKEx have listed the token.
If you prefer decentralized exchanges, SUSHI is still available on Uniswap and can of course be purchased from the SushiSwap Exchange. Liquidity on all these exchanges is very high, and the 24-hour trading volume for SUSHI is nearly double its market cap. As such, you should have no issues getting your hands (or chopsticks) on this succulent cryptocurrency token.
SUSHI Cryptocurrency Wallets
Since SUSHI is an ERC-20 token, it can be stored on just about any cryptocurrency wallet which supports Ethereum-based assets. Where you should put your SUSHI depends on what you plan on doing with it.
If you are interested in using SushiSwap whether to provide liquidity or participate in governance, your best bet would be a Web 3.0 wallet such as Metamask. If you plan on holding your SUSHI until the market is hungrier for it, a secure mobile wallet such as the Atomic Wallet or a hardware wallet such as the Trezor wallet should do the trick!
SushiSwap has one goal and one goal only: to become the best DEX in cryptocurrency. This is quite a broad goal, and there are not currently any specific future milestones detailed by the new SushiSwap team.
The closest document to a visual roadmap is SushiSwap’s Medium post dated September 12 2020. Since then, however, SushiSwap has released its 2021 incredibly ambitious roadmap, which includes its MISO upgrades, its aspiration to build on Layer-2, AMM 2.0 infrastructure, SushiBar Version 2 and Wrapped SLP tokens for greater DeFi utility.
Despite the seeming ridiculousness of the project and the chaos it has caused in its short history, SushiSwap has still managed to hold on to around 800 million of the initial 1.14 billion it drained from Uniswap. The DEX is also maintaining around 300 million USD of daily volume.Competition within the DeFi DEX environment is fierce, especially with Uniswap, however SushiSwap has historically proven to be a strong contender and will more likely than not continue to outperform most existing DEXes out there.
Despite experiencing a rather turbulent, bumpy journey at the very beginning of its existence, SushiSwap has developed into one of the go-to DEX, yield farming and LP solutions in DeFi, and it could potentially one day even come to steal the crown from Uniswap as ultimate DEX platform.
But, it should also be noted that the relatively unprofessional naming and UI of many DeFi protocols including SushiSwap are perhaps even more distasteful to serious retail investors than seasoned yield farmers. Controversies such as Chef Nomi’s exit scams really hurt the space at the end of the day.
That being said, SushiSwap seems to be serving up more delicious meals than ever under new management. The ambition and dedication of its core developers and community is admirable and may just be enough to carry the project forward well into the future.
Special thanks to @Infinity_UK for helping clear up a few details about SushiSwap’s SushiPowah voting metric!
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.