For as long as cryptocurrency exchanges have existed, the ones that we most fondly remember or often use are centralized. To some, the idea of using a centrally-owned entity to have access and manage assets that inherently are designed to decentralize the financial system goes against the principles of blockchains and cryptocurrencies in the first place. With that in mind, decentralized exchanges (or DEXes) were created, hence leading us towards comparing Uniswap vs SushiSwap.
A look at the marketplaces where billions of dollars worth of tokens are being swapped every second now belongs to the community, Uniswap and SushiSwap are among the most popular of the DEXes in the world. But look a little bit closer, and you'll find that there's a lot of similarities, as well as subtle differences that keep these two siblings apart. But which one between them – Uniswap vs SushiSwap – is the best decentralized exchange for your money?
Uniswap vs SushiSwap Comparison Table
|Ranking: 157||Ranking: 47|
|Trading Fees: 0.30%||Trading Fees: 0.30%|
|Market Capitalization: $20,395,540,639||Market Capitalization: $1,940,568,724|
|Number of Markets/Trading Pairs: 8000+||Number of Markets/Trading Pairs: 1000+|
|Token Price: $38.97||Token Price: $15.25|
Uniswap vs SushiSwap – Main Differences
A little hint that we dropped earlier on in our Uniswap vs SushiSwap was our mention of the word “siblings”. SushiSwap was forked out of Uniswap, and thus carries a lot of its functionality and core features. Even its user interface looks almost identical! Although Uniswap continues to remain the most popular of the two by far in both user count and outright trading volume, there are a few key differentiators that make SushiSwap unique. Mostly, this is in regards to SushiSwap's services, which offer more than just simple token swaps.
What is Uniswap?
Founded in 2018, Uniswap was in fact one of the oldest and original stalwart decentralized finance (DeFi) protocols to still remain in existence today. Built on the Ethereum blockchain, Uniswap was developed initially with the help of the Ethereum Foundation, before later growing into the behemoth that we know today. With an all-time volume of $242-billion executed across more than 46-million trades by users worldwide, Uniswap is the biggest of the decentralized exchanges.
When most people think of token swapping, Uniswap usually comes to mind. Released with generational upgrades to bring new optimizations and improvements to the protocol, Uniswap evolved from its V1 stage to V2 in May 2020. A year later, in May 2021, Uniswap V3 had its main-net launch, which mostly concerned upgrades to ensure better liquidity flows with the introduction of Concentrated Liquidity, faster execution times for traders, as well as multiple tiers for trade fees.
However, most users – as of writing this Uniswap vs SushiSwap guide – are still running on Uniswap V2, which will be the basis of our comparison. Its native UNI tokens have also seen a lot of price appreciation lately, having risen more than 9,200% in gains from their all-time lows in September 2020. This has made Uniswap's cryptocurrencies the 12th-most valuable token on the market. This marks a huge period of growth for Uniswap, as they host more than 72,000 liquidity providers.
How do Decentralised Exchanges (DEXes) Work?
Decentralized exchanges such as Uniswap, as well as SushiSwap and others, work very differently compared to a centralized exchange that we are more familiar with. In a traditional exchange, which also applies to other conventional platforms like stock trading, use order books to organize and set the trades. When a person wants to buy a certain item – in this case, a crypto token – they log their buy order onto the order book. They then need to wait until a buyer shows up.
When a buyer is willing to match the seller's price and amount, only then will the trade be filled and the seller relinquishes all their assets to the buyer. On the other hand, a DEX adopts the system of an automated market maker (AMM). With an AMM, there are no order books – instead, users will pool together their assets for a selected trading pair into liquidity pools. It's those pools from which users will “buy” their tokens from, where liquidity is readily available.
Instead of having to manually match a buyer's price to the seller in order to complete the trade and set a fair market price, an AMM uses algorithms to set the pricing. This is done by measuring the supply of assets within the liquidity pool, the demand for token swaps for that pool, and the overall market volatility, among other important metrics to consider. As an incentive, the users who pool their assets together become liquidity providers (LPs), who then earn a portion of the trading fees.
How did SushiSwap begin?
The use of automated market makers, as we've now learned in our Uniswap vs SushiSwap comparison, has multiple benefits. Mainly, an AMM helps to avoid the phenomenon of large spreads (disparities between buy and sell prices) that plague illiquid assets. But if this system is already as perfect as it could be, why did SushiSwap decide to fork out of Uniswap? Its creator, the anonymous Chef Nomi, apparently wanted to remodel the tokenomics around Uniswap.
SushiSwap was later born as a fork of Uniswap, and initially gained more than $1-billion in total value locked within hours of forking from Uniswap. However, SushiSwap gained infamy after Chef Nomi drained SushiSwap's development fund in late 2020. Chef Nomi exchanged it with 37,400 ETH (worth $14,000,000 then). After SushiSwap's SUSHI tokens dropped over 70% in price within a day, Chef Nomi later returned the funds. Changes were introduced to prevent this from happening again.
Since then, SushiSwap has emerged as one of the leading decentralized exchanges. According to DeFi Pulse, SushiSwap occupies the No. 6 ranking for the amount of liquidity on its protocol, worth $5.36-billion as of writing this Uniswap vs. SushiSwap comparison. This has been reflected in the price of its native SUSHI tokens, having gained more than 3,100% since its all-time lows in late 2020. With a market cap of over $1.9-billion, SUSHI is the 74th-most valuable token.
Why Should You Choose Uniswap?
For a start, the biggest difference from a user's or trader's point of view when comparing Uniswap vs SushiSwap would be the services that they each offer. Uniswap is more focused towards token swapping, with its interface quite simply divided into three sections – ‘Swap', where you can swap from one token to another; ‘Pool', where you can become a liquidity provider (LP) to contribute tokens into a liquidity pool; and ‘Vote', where you can take part in Uniswap's on-chain governance.
Although simple, Uniswap manages to be the most used DEX to date, with more than 8,000 liquidity pools to choose from, and $8.1-billion in total liquidity. Its deeply liquid protocol is the main reason why many people continue to choose Uniswap, despite the fact that being built on Ethereum means that users are subject to paying high and often volatile gas fees. This immense liquidity makes it so that you can find trading pair swaps at competitive prices.
For liquidity providers (LPs), the continued surge and inflow of users enables them to have the incentive to contribute even more of their assets to the available liquidity pools. Some token pairs (at the time of writing this Uniswap vs. SushiSwap comparison) have very high yields for LPs. For instance, a LEASE-ETH pool is showing a potential for LPs to earn upwards of 1,500% APY rewards, while a SHIB-ETH pool has its yearly rewards currently calculated to nearly 800% APY.
Why Should You Choose SushiSwap?
Looking at SushiSwap, it overall has a lower volume of liquidity in its pools compared to Uniswap, but still ample enough. What sets it apart, as we highlighted earlier, is in what users can do on SushiSwap. On their dApp, you can see that basic token swapping and pooling together tokens take center stage. But then we can see other services being provided, such as incredibly lucrative yield farming, further maximizing your return potentials through staking, or even lend tokens.
Clearly then, SushiSwap is a lot more than just a token swapping platform. Its yield farming, for example, offers very high returns, with a MASK-USDC instrument giving out 173% at the time of writing. Another key distinction between Uniswap vs. SushiSwap is its tokenomics, as we noted before. Unlike centralized exchanges, DEXes have much simpler fee structures. Currently, both Uniswap (in its V2 stage) and SushiSwap have a 0.3% fee for every single transaction.
As is the case with automated market makers, there are no middlemen, and all the trading fees go back to liquidity providers. LPs on Uniswap are rewarded with 0.3% of the trading fees. Meanwhile, SushiSwap rewards liquidity providers with a lesser 0.25% of the trading fees from liquidity pools, with another 0.05% being paid out to all SUSHI token holders. Therefore, there is a case to be made about potentially earning more from the smaller SushiSwap ecosystem, just by holding SUSHI.
Uniswap vs SushiSwap – Final Conclusion
Now rounding up our Uniswap vs SushiSwap comparison, we can see that tokenomics is playing a big role in differentiating the two. SushiSwap, with its more equitable sharing to even non-liquidity providers as well as continued token distribution, makes it so that they are trying to attract and incentivize more people to join the SushiSwap network, as well as encouraging them to stay. But will it deter us from handing the crown over to Uniswap as the champion of the DEX?
No, but it's a very close competition. Uniswap is deservedly the winner of our comparison, purely because it does the whole token swapping thing just right. With deeper pockets for liquidity and continued commitment to improve pricing data and optimize the trading experience, Uniswap will continue to be a favorite for anyone looking at a simple, reliable, no-nonsense exchange. It's very easy to use too, devoid of SushiSwap's odd naming scheme to set apart one product from another.
That said, SushiSwap is still a highly compelling protocol for anyone who's seeking a bit more than wanting to exchange tokens. For them, the yield farming on SushiSwap has the potential to be a hugely profitable side-income, as well as staking and lending out tokens to earn interest. There are a lot more ways that you can make your money work compared to Uniswap. Overall, our Uniswap vs. SushiSwap comparison does prove that the days of the centralized exchanges might be numbered.