Thanks to 420slap for the guest post!
It’s the season of vegetables & forks within the DeFi universe and a new dish has been served, and this one needs a chopstick and not a fork! We are talking about the newest entrant – SushiSwap.
1/ Introducing #SushiSwap🍣, an evolution of #Uniswap with $SUSHI tokenomics. SushiSwap protocol better aligns incentives for network participants by introducing revenue-sharing & network effects to the popular AMM model.https://t.co/v94Yklot0b
— 🍣 SushiSwap | sushiswap.eth (@SushiSwap) August 26, 2020
SushiSwap is a fork of Uniswap with a native governance token ($SUSHI) and a change in the reward distribution mechanism. With Uniswap, LPs earn 0.3% of trading fees whereas on Sushiswap, LPs will earn 0.25% fees, with the remaining 0.05% being distributed to SUSHI holders.
The objective is to incentivize early liquidity providers with added incentive for bootstrapping the pools. In Uniswap, LPs earn fees so long as liquidity is provided. Sushiswap aims to add a more passive form of income with early LPs benefitting from the future traction of the protocol through SUSHI and the 0.05% fee.
In typical DeFi degen style, SushiSwap founder Chef Nomi made a call to arms for auditors to conduct a smart contract audit after the protocol reached $150M in TVL within the first 5 hours of launch. Quantstamp has since taken responsibility to audit the contracts alongside a 48 hour time lock on the governance contract to prevent any malicious activity from the founder. A rewards distribution of 10% has been set aside for the team for audits & operational expenses, an allocation which can reportedly be adjusted through governance.
LPs stake Uniswap LP tokens across any of the 13 support pools. 100 SUSHI is minted every block. During the first two weeks, liquidity incentives are boosted by 10x with the native SUSHI / ETH pool having 2x (2000) rewards.
At the time of writing, the SUSHI/ETH is netting upwards of 1500% APY while the total value locked exceeds $800M. Here’s a great dashboard to stay up on all relevant SUSHI metrics.
While there was skepticism about the project amongst crypto twitter at launch, the recent success of community-governed projects like yEarn and the transparency of the project founder has allowed SUSHI to create a cult-like following among hungry yield farmers.
Given the strong traction, SUSHI seems to have ruffled the feathers of some of the VC backed projects, claiming that SushiSwap is inditing a gambling culture in DeFi rather than the social movement it was founded on.
Despite the contention, Uniswap seems to be a direct benefactor of this SUSHI cooking event with total liquidity more than doubling since launch. This is best exemplified by a new record for Unsiwap, with 24h volume exceeding that of Coinbase for the first time.
🦄 Uniswap: $426M
🏦 Coinbase: $348M
Hard to express with how crazy this is. pic.twitter.com/48o0xRkiUo
— Hayden Adams 🦄 (@haydenzadams) August 30, 2020
Now, SUSHI holders are rallying around the newly launch governance platform, voting to increase rewards for SUSHI/ETH LPs, and add new pools to the protocol.
They say strike when the iron is hot. SushiSwap’s community governance model has arrived at the right time with all the traction around fair launch projects such as YFI and the recently announced Fair Launch Capital. As they say, SUSHI is also a dish that is best served cold.
To stay up with SushiSwap, follow them on Twitter!
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.