New DeFi “Food” SushiSwap: Uniswap plus Yield Farming?

2020-09-03 09:50:00 · 2262 views · 5 min read

 

Recently, a new decentralized exchange protocol named SushiSwap just launched. Its contracts live on Ethereum on 28 Aug, it has locked up over $250 million worth of value within the first 24 hours. 

 

 

Then What Is SushiSwap?

 

Sushiswap is a fork of decentralized exchange Uniswap, a top DeFi project for swapping tokens on Ethereum. The two DeFi products work just the same: provide liquidity and reward investors who provide liquidity into pools with a portion of their trading fees. 

 

 

Open SushiSwap’s website, you’ll find the UI looks quite like Yam. Actually, the team says on their Medium that “We borrow most of the UI code from Yam”. And the name “Sushi” basically makes it a “meme” cryptocurrency, just like other popular “food” DeFi such as Spaghetti, Shrimp, Cream… Search “Meme Coin” on dapp.com, you will see all the meme coin projects listed. 

 

 

 

So What Makes SushiSwap Different? Think of It as Uniswap Meets Yield Farming.

 

One of the main differences between the two platforms is that SushiSwap rewards its liquidity providers with its own token, $SUSHI. This mode is a little like DeFi lending protocols, who reward users with their governance tokens, such as Compound’s $COMP or yearn.finance’s $YFI. $SUSHI also has governance function, which makes SushiSwap not only owned by developing teams but also investors.

 

 

$SUSHI is distributed to those who provide liquidity to specific Uniswap pools. Then, they can deposit their Uniswap LP tokens into the SushiSwap staking contracts to start earning $SUSHI.

 

(Source: SushiSwap official Medium)

 

 

It means, if you want to stake Uniswap tokens in return for $SUSHI, you need to acquire those tokens in Uniswap first. This has pumped up Uniswap’s daily trading volume to its all-time high. Uniswap’s 24h volume has reached $953,234,068, now ranks NO.3 in all exchanges on Coingecko, which surpasses many top centralized exchanges such as Coinbase and Huobi.

 

 

Once the bonus period ends, SushiSwap will redeem all the Uniswap LP tokens and move its competitor’s assets over to SushiSwap’s own pools. So some call it “Vampire mining”.


 

 

The Value Behind $SUSHI - High Correlation of SushiSwap Volume and $SUSHI Price

 

One more difference is the way and portion of reward distribution. In Uniswap, it rewards 0.3% of the trading fees to the liquidity providers. While in SushiSwap, who has its own token, it plans to reward 0.25% of the trading fees, then the remaining 0.05% will be swapped back to $SUSHI in the market and distributed to $SUSHI token holders. This means more trading volume in SushiSwap, the more funds will be converted into $SUSHI tokens, which in turn will push the $SUSHI price higher. So $SUSHI price and the dapp volume will be highly correlated when the swap goes live inside SushiSwap. 

 

 

(https://www.dapp.com/app/sushiswap. The black line shows the price trend of $SUSHI token. It hasn’t accumulated enough data for 3rd Sept at the time of writing this article, so it looks like the statistics drop today.)

 

 

At present, it relies on the liquidity pools of Uniswap, and the token price has already shown a similar trend to its volume. 

 

 

All in all, this high correlation could be an important signal of the price variation. You may use this volume vs price indicator to help with your $SUSHI token trading.

 

 

Arousing great attention and locking so much value, SushiSwap is growing really fast in the very beginning. Does this remind you of the beginning flourish of Yam1.0? But what happened to it in 2 days? Yam1.0 ended with hundreds of millions of tokens forever locked.

 

 

So How Risky Is Investing in SushiSwap?

 

SushiSwap is not created by famous developers, only known as “Chef Nomi” on Twitter, which makes it seem a little bit unreliable. Its smart contracts were not audited until today, 3rd Sept. Blockchain security firm Quantstamp reviewed SushiSwap’s smart contracts, addressing 10 issues, none of them highly risky.

 

 

So far, SushiSwap is an upcoming project that has attracted many investors and their money. It also challenges an already successful DeFi project, Uniswap, by “vampire mining”.

 

 

SushiSwap vs Uniswap, who will be the top 1 decentralized exchange in the long run?

 

 

Join the discussion here and see which one gets more support: https://www.dapp.com/discussion/sushiswap-uniswap-top-dex.


 

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