SushiSwap, also known as Sushi, is a Decentralized Finance (DeFi) protocol that provides users with a range of services including a decentralized exchange (DEX), lending, leverage, yield farming, and staking. In addition to the broad range of features, Sushi is also known for its compatibility with many chains, having deployed on 16 chains to date.
SushiSwap was created in 2020 by pseudonymous founders Chef Nomi and 0xMaki as a fork of Uniswap’s open-source code base. To attract users to the platform, Sushiswap executed a campaign known as a vampire attack, promising rewards to users who locked their funds in a particular pool on Uniswap. These funds were to be transferred once SushiSwap launched.
During the process, Chef Nomi removed approximately $13M of funds from the pool, triggering fears of an exit scam. To calm investors, Chef Nomi transferred control to Sam Bankman-Fried, the well-known co-founder of Alameda Research and FTX. Soon afterwards, Chef Nomi returned the funds to the pool and apologized publicly. Bankman-Fried oversaw the transfer and instituted a multi-signature wallet to improve platform security and restore user confidence.
Since that time Sushi has expanded its product offering and user base to become one of the most popular DeFi platforms.
Sushi’s core functionality is that of an exchange. Using an automated market maker (AMM) system like Uniswap and other popular DEXs, users can either trade tokens for a small fee, or deposit tokens to provide liquidity for popular trading pairs and earn a share of the trading fees.
As of May 2022, the underlying mechanism of the Sushiswap exchange is in the process of evolving. Trident is a new framework for building and deploying AMMs that is intended to streamline development of new pools and open the door to a range of new financial products.
Sushi’s Onsen program is a platform that runs in parallel to the DEX which is intended to incentivize users to provide liquidity to newly added trading pairs. Token pairs on the Onsen Menu are available for yield farming rewards on top of the trading fees they would already earn. To participate, users first deposit their tokens into the liquidity pools and receive what are known as LP tokens. They can then stake their LP tokens to earn additional rewards. All pairs on the Onsen Menu earn rewards paid in the SUSHI token, with many offering bonus rewards paid in other tokens.
The BentoBox (also known simply as Bento) is a token vault that allows users to deposit capital and earn yields. Bento’s innovative approach is to combine multiple low-risk yield farming strategies to bring in stable returns. Funds deposited into the BentoBox may also be used in flashloans to generate additional yield for depositors. Bento is intended to function as an infrastructural component of Sushi’s financial instruments. It serves as the foundation for other products like Kashi, Sushi’s lending and margin trading platform.
Kashi allows anyone to create custom, gas-efficient markets for lending and borrowing cryptocurrency assets. Perhaps the most notable feature of Kashi is the broad diversity of tokens that are supported. This is possible thanks to isolated risk markets. What this means is that rather than all lending and borrowing on the platform counting as one market (with shared risk), each market is made up of a single pair of tokens: one to use as collateral and one to borrow. This isolation allows for more advanced trading strategies such as leveraged long and short positions.
Holders of the SUSHI token can benefit from yield strategies as well. By depositing SUSHI into the Sushi Bar staking contract, users can receive xSUSHI, a compounding token that accrues value from platform fees. For every swap, 0.05% of the fees earned are added to Sushibar pool in the form of LP tokens. These tokens are sold once per day (or more) to buy back SUSHI on the market and dispense it proportionally amongst all xSUSHI holders. This means that xSUSHI is always worth more than SUSHI.
Stakers too can benefit from the power of the BentoBox thanks to Meowshi. This cute interface adorned with cats allows users to wrap xSUSHI in BentoBox for double the yield. By doing so they receive MEOW tokens at an exchange rate of approximately 100k MEOW per 1 xSUSHI. MEOW tokens retain all of the same governance rights as xSUSHI.
Sushi employs a hybrid governance strategy intended to allow for a faster development pace than other platforms. xSUSHI holders (and depositors in the SUSHI-ETH liquidity pool) can debate and vote on Snapshot proposals, and all major changes including any use of the treasury multisig wallet must achieve a quorum (majority) vote. Where Sushi differs from some DAOs is the authority instilled in the core developers team. Operations governed by the core team such as administration of the farming pools and use of the growth fund require only 3 of 5 of the operations multisig holders to approve transactions.
Voting power, known as SUSHIPOWAH, includes a weighting component. 1 xSUSHI = 1 SUSHIPOWAH
1 SUSHI-ETH LP = 2 SUSHIPOWAH
Try out a swap today!