Sushi Review

What is Sushi?

Sushi, a popular DEX and AMM built on the Ethereum network, whose slashing rise to popularity was somewhat controversial. Born in August 2020 as a Uniswap hardfork, the project went a long way to become the DEX we know now. 

Sushi was founded by an anonymous Chef Nomi and his comrades, who took the open-source code of Uniswap, the biggest DEX at the time, and launched it as their own new project. The only original features Sushi received from the start were the project’s tokenomics and governance system, as well as improved UX and gamified sushi-themed menu.

Not only was the project forking Uniswap, but the developers used quite an aggressive marketing tactic, called ‘vampire mining’, aimed at draining liquidity directly from its predecessor. Sushi proposed huge incentives for users paid in SUSHI tokens in exchange for staked LP tokens on Uniswap. Those tokens were sold for their underlying assets on Uniswap, thus successfully draining liquidity from one platform to another. 

Sushi’s history almost ended in its third week when the project reached $1.3 billion in TVL. The turmoil emerged after one of the core devs Chef Nomi all of a sudden sold $14 million worth of Ethereum from Sushi’s developers’ fund on Uniswap, crushing all dreams of decentralization as well as the price of SUSHI. Later, Nomi returned the funds, apologized for his reckless and pretty much rug-pull-like behavior, and gave up his control over Sushi to the community.

And Sushi survived - with the help of the community and especially FTX and Alameda Research CEO Sam Backman-Fried who temporarily took control over the platform, secured migration of returned funds into a multisig wallet, and oversaw the end of the ‘liquidity draining’ campaign.

How does Sushi work?

Exactly like Uniswap, Sushi’s main purpose was to solve liquidity problems for traders. SushiSwap offers two exchange options namely instant trading through liquidity pools and limit orders V2.

For the instant swapping option, the platform fully relies on a system of smart contracts organized in the format of an automated market-maker, where the liquidity pools for supported tokens are created and managed and the prices of assets are based on algorithmic formulas. Sushi enables users to become liquidity providers in exchange for LP tokens representing a proportional share of the deposited assets. Sushi charges a 0.3% trading fee; 0.25% of these fees go back to liquidity and the remaining 0.05% goes to the SUSHI token holders.

Sushi’s limit order function differs from the order-matching mechanism used in traditional finance or centralized exchanges. Limit orders on Sushi work in a decentralized manner, taking advantage of the protocol’s AMM mechanism, which allows executing instant trade in the liquidity pool when the desired price has been met. In addition, since Sushi’s limit orders are stored in the BentoBox (Sushi’s yield generating vaults), the orders are also yield-bearing.

There is also a built-in lending and borrowing platform, Kashi, allowing users to borrow assets from pools provided by LPs in exchange for fees. The fees received from each pool are later proportionally divided between all the lenders. Users may create a lending pool for any asset they choose, because all pools in Kashi are completely separated from each other, to avoid influencing underlying assets' value, thus isolating the risks.

But the main feature of Sushi since its creation is definitely yield farming opportunities in the Onsen menu. Users can lock their LP tokens in various pools of paired assets, receiving fees and SUSHI tokens as rewards. There is a variety of active pairs on Sushi Yield Farms, with thousands of supported tokens.

For those who would like to earn more SUSHI, the platform offers a bit more risky and profitable SushiBar Staking option. Every swap on the exchange brings an additional 0.05% fee which is proportionally distributed among users with a stake at SushiBar. There is also a rate at which beneficial xSUSHI tokens are generated, so when a user decides to unstake their SUSHI, they will end up with more tokens than were originally deposited.

Sushi works in a non-custodial manner, meaning the platform doesn’t need to own the tokens users want to swap, allowing everyone to trade trustlessly and peer-to-peer.

Another product on Sushi is BentoBox or Bento, a platform of yield-generating vaults, allowing users to earn passive income with low-risk strategies. This is a highly scalable network with the main focus to avoid incurring any loss. The funds locked in vaults can be used for flash loans, deposited on Compound for lending yield, or served on the Sushi bar to earn more SUSHI. BentoBox actually operates as a separate layer upon which Kashi is built. The more projects will be based on top of Bento, the cheaper the overall transactions on the platform will become.

Another Sushi’s project, Miso, is a smart contract product suite aimed at launching tokens for new DeFi projects via auctions.

How to use Sushi?

Before proceeding with the Sushi app, users are first required to connect a wallet. Sushi wallet support includes Metamask, Wallet Connect, Coinbase Wallet, Fortmatic, Portis, and Binance Chain Wallet.

The Sushi app’s main page starts with the Trade section, and if a user wants to swap tokens, this page should be the starting point. For instant swapping, the user needs to select two tokens to be swapped from one to another from the drop-down list in two fields, or type in the name or address of the token and confirm the trade by clicking the ‘Swap’ button.

If users want to earn extra yields on their tokens, they can head over to the Liquidity section, and choose the Pool section, which will display the list of available pairs along with users’ balance. Select the pair they wish to provide liquidity for and click the ‘Supply’ button. If the user wishes to create a new pool, they should navigate to the ‘Add liquidity’ tab and click on it. In this section, users are required to select which tokens to input from the drop-down menu, or enter the token’s name or address in two fields. Two token amounts need to match each other in monetary value. Then, the operation should be approved by clicking ‘Confirm Adding Liquidity’.

Once done, the user will receive an LP token which can be deposited into Sushi farms for additional yield. It is necessary to navigate to the Farm section, where all available farms will be displayed. Once the preferred farm is selected, the users need to click on it, enter the desired amount of LP tokens and click the ‘Deposit’ button. Farming will happen immediately once the transaction is completed.

SUSHI holders may also want to stake their tokens, if so, they need to navigate to the SushiBar section and simply enter the desired amount of tokens in the field and confirm the transaction by clicking the ‘Confirm staking’ button. Then, the users can find details about the performance of xSUSHI, on the Stake page. For more detailed analytics, the user can click the ‘Your SushiBar Stats’, to see the profit/loss information. 

Developers can also build dApps on the Sushi platform, as the smart contracts can be interacted with by anyone on the blockchain. The developer's guide can be found here. 

The SUSHI token

Since the launch of Sushi, its tokenomics has been the main distinctive feature of the project. The project’s native token, SUSHI, is playing an important role in the governance system as SUSHI holders can decide the fate of the platform by voting on the Sushi Snapshot channel. 

SUSHI can also be traded on centralized exchanges and DEXes, it can be used for staking or yield farming in pairs with other assets, as well as for instance be locked as collateral on Aave. The maximum supply of SUSHI is limited to 250,000,000. 

Is Sushi safe?

According to the announcement from July 2021, the team standing behind Sushi and all its products had grown to 14 full-time members. There were only five developers engaged in the project in its early days.

Aside from the notorious Chef Nomi who almost destroyed the project in its first month of existence, another co-founder, 0xMaki, is still in business as a core contributor at Sushi. He was trusted by the community to authorize some small improvements to the protocol. The bigger changes, however, require the community voting on Snapshot or a multi-signature wallet activation. Any use of the devfund wallet requires 6 of 9 signatures from the selected trusted members of the DeFi community with Sam Backman-Fried of FTX and Alameda and Robert Lershner of Compound among those selected Multisig-members. 0xMaki stepped down from the core team in September 2021.

Partners 

Sushi lists popular DeFi projects such as Yearn Finance, CREAM Finance, Aave, Pickle Finance, Akropolis, and Keep3r Network among its partners. 

Although Sushi was originally built on Ethereum, it has since integrated with other blockchains and L2 solutions, such as BNB Chain, Fantom, Huobi ECO Chain, and Polygon.

What's next?

The next big thing for Sushi is promised to be its new capital-efficient AMM known as Trident, which is currently being developed on top of the BentoBox vault system. This ‘new generation AMM’ is promised to offer users four types of pools and much better protection from market volatility. In addition to familiar constant pools with two types of assets, Trident is going to introduce a hybrid multi-asset pool that can consist of up to 32 tokens. There will be a concentrated pool, where users can specify the token asset’s price range to add liquidity, and a weighted pool with different weights for the pairs of tokens.

Another brand new product the team is working on is Shōyu, an innovative NFT-platform with a comprehensible launchpad, built-in immersive gallery, secure decentralized exchange, and other useful features for artists and collectors.

There are more general directions Sushi is intended to grow. First of all, it's the further decentralization of the platform, while the second priority is to ensure Sushi’s multi-chain future.

Links

https://docs.sushi.com/