WTF is SushiSwap?
Decentralized Finance is arguably one of the most significant financial advancements of the last century. But the concept is still in its infancy and there are several hurdles to overcome. We may be a long way from relying completely on decentralized financial services, but we take a step closer every day. There are a lot of great protocols, cryptocurrencies, networks, and programs that are making this conversion easier.
Turn back the clock only a few years and many cryptocurrency communities were dealing with the same serious problem that centralized financial institutions were dealing with. The problem was that if any community featured a single governing entity, then it exposed itself to a number of security threats and the risk of corruption. This problem was recently overcome with the rise of decentralized exchanges (DEXs).
What Is SushiSwap?
SushiSwap is a DEX created by the Sushi organization. As for Sushi, they consider themselves a "community-driven organization" with a focus on overcoming the DeFi problems we discussed earlier. They are currently working hard to overcome the liquidity problem, but will undoubtedly help tackle many other problems associated with DeFi and blockchain networks in general.
In addition to their DEX, Sushi has also developed yield farming tools, a decentralized lending market, and efficient staking derivatives. This multi-faceted attempt at solving the liquidity problem is what makes Sushi such a unique community. Each one of these tools is exceptional in its own right, but their benefit is increased tremendously when utilized together on a DeFi network.
For the moment, let's focus on their DEX, SushiSwap. This platform allows users to trade cryptocurrencies without the need for trust in any centralized entity. Every transaction is handled on a P2P basis and all of the liquidity is supplied from other users through techniques like yield farming. As long as there are traders online willing to farm liquidity, then the platform can continue to fund innovative DeFi solutions.
What Makes SushiSwap Exciting?
The SushiSwap approach to liquidity is fairly simple on paper. Interested parties are required to supply two types of tokens. The first token is the liquidity token itself and is known as the quote token. The second is a more common stable coin. The stable coin is most often Ethereum as SushiSwap is designed primarily to operate with Ethereum networks. After supplying these tokens, the person receives SLP tokens that represent their percentage-based ownership of the total liquidity pool for the pair of cryptocurrencies they provided.
The value of the two provided tokens will likely fluctuate while they are within the liquidity pool. SushiSwap is designed in a way that continually recalculates and adjusts the number of provided tokens to reflect the change in value. This means that you can supply equal amounts of two tokens but their quantities may have changed when you reclaim that invested liquidity.
This automated stabilization makes SushiSwap and highly efficient and accurate platform for decentralized exchanges. It ensures that values in the pool remain consistent while also eliminating some of the more tedious aspects of yield farming.
The SushiSwap Token & Governance Model
Rewards for providing this liquidity come in the form of protocol fees and the native SushiSwap token, which is known simply as SUSHI. There are a total of 100 new SUSHI tokens minted daily. The major profit potential associated with yield farming on the SushiSwap networks comes from combining the reclaimed liquidity along with the newly acquired SUSHI token.
The SUSHI token is useful in more ways than one. One such way is through the use of another Sushi application called SushiBar. The SushiBar application allows for the trading of SUSHI tokens for a second token called xSushi. What is special about xSushi is that it can be traded openly for fiat currencies like the USD. This represents a branch away from the decentralized model but is important because it creates a new avenue for earning a passive income from the original liquidity provided.
The SUSHI token also plays an important role in the governance model of the network. This is what controls the updates, new programs, and any changes that occur within the blockchain network. There is no single entity that controls these changes because SushiSwap is completely decentralized. Instead, all of these changes or voted on using the governance token.
SushiSwap is a community-based product and places a strong emphasis on communication. Proposed changes are often discussed in great detail on their official forum long before the democratic process begins. In this way, everyone who is truly interested and invested in the platform will have a say in what happens and will fully understand it before changes take place.
Who Is On The SushiSwap Team?
Referring to themselves as "chefs", there are several great developers and advisors working behind the scenes to create SushiSwap and other Sushi products. Here are just a few:
- OxMaki – Team Leader
- Joseph Delon – CTO
- Jiro Ono – Core Developer
- OxKeno – Core Developer
- OxNori – Security Team Leader
- Chester LaCroix – User Experience Design Leader
- Ayoki – Marketing Leader
- OxChu – Product Manager
What Funds SushiSwap?
As a decentralized exchange with a heavy focus on yield farming, SushiSwap is funded primarily by its users. Fees are pulled from every transaction and become part of the overall liquidity pool. Even major investors get involved by following the same process as your average trader (albeit with greater capital). This is partly what makes SushSwap such a unique and exciting prospect on the market today.
How To Participate In The SushiSwap Network?
Participation in the SushiSwap network is incredibly simple. All that you need to do is visit their website, create your account, and connect your cryptocurrency wallet. You can then begin exchanging tokens, partaking in yield farming, and earning a passive income. If you want to be even more involved in the network you can join their public forums and discussion boards where they discuss upcoming changes, new ideas, and projects in the works.
In Q3 2020, the community decided ⅔ of $SUSHI LP rewards would be locked for a 6-month period. At the end of March, this period elapsed.— SushiChef (@SushiSwap) April 6, 2021
There remains confusion over how these rewards will be distributed.
A thread explaining how exactly this will work 👇 pic.twitter.com/OkwoaCVabO