From prototypes and experimental ideas to an $80-plus billion industry, decentralized finance is the new big thing in the financial world next to the rise of fintech giants. Only time will tell if it's the next stage in the evolution of the banking system post-Wall Street, but the momentum is certainly not slowing down. The portal to DeFi, as some might reasonably argue, are the decentralized exchange (DEXes). In our SushiSwap review, we're going to take a peek at one of those DEXes that dares to be different.
Many people think of Uniswap when they hear the words “decentralized exchange.” Although Uniswap remains a behemoth in scale, a few people might be put off by its simplicity. Surely, a DEX could be more than just a platform for swapping from one token to another, right? In comes SushiSwap, which offers a myriad of services covering from yield farming to lending and staking. But is that enough to topple the top DEXes? Well, our SushiSwap review attempts to find out.
What is SushiSwap?
There are a lot of similarities drawn between those two aforementioned DEXes, as SushiSwap was, in fact, born as a fork of Uniswap in September 2020. Within hours of its launch, SushiSwap managed to attract over $1-billion in liquidity from Uniswap users. However, it gained controversy after its anonymous founder, Chef Nomi, drained SushiSwap's development fund, and exchanged it for 37,400 ETH, which was worth around $14,000,000 at the time.
SushiSwap's SUSHI tokens later dropped in value by 70% in a day before the funds were later returned to the community. Nonetheless, SushiSwap has recovered quickly from that incident and is now one of the biggest DeFi protocols, with more than $4.7-billion locked on its platform for liquidity. This is on top of a total trading volume of over $65-billion, across 1,110 pairs. There are now 150,000 users around the world that holds its SUSHI tokens and are active on SushiSwap.
How Does SushiSwap Work?
As we mentioned earlier in our SushiSwap review, SushiSwap is a decentralized exchange or DEX. In contrast to regular, centralized cryptocurrency exchanges, DEXes such as SushiSwap are fundamentally different in how they function. Instead of a more traditional peer-to-peer or an order book to facilitate the market making and pricing of assets, SushiSwap relies on an AMM, or ‘automated market maker'. It uses algorithms rather than buyers and sellers to set the pricing.
Using an AMM, users trade against those algorithms. Users can pool together tokens for a certain trading pair – such as UNI-SUSHI (Uniswap – SushiSwap) – into liquidity pools and thus become liquidity providers (LPs). When a user wants to “buy” a token, they swap one token to another from one of these pools, which the algorithms will set a fair market price based on key metrics such as supply, demand, volatility, and etc. LPs will then get rewarded with a portion of the trading fees.
How Can You Trade on SushiSwap?
We can see that AMM-based trading in action for our SushiSwap review by opening up their dApp (decentralized application) once you have a cryptocurrency wallet connected. As we noted before, SushiSwap has a large number of trading pairs, with more than 1,100 active markets to choose from.
As for fees, SushiSwap – just like Uniswap – charges a flat trading fee of 0.3%. The fascinating part of SushiSwap's token swapping protocol is that it's not just compatible with Ethereum.
As a multi-chain network, you can trade assets between different blockchains. This is a huge bonus when it comes to trying to find better prices, do arbitrage, or lower gas fees elsewhere. You can trade on the Ethereum blockchain, but you can instantly switch between it to, for example, the Binance Smart Chain (BSC), Polygon (Matic), xDai, Avalanche, OKExChain, and more. The multi-chain functionality ensures that users get the most competitive prices, and it offers a lot for LPs, too.
A crucial part of DEXes is liquidity, and you can contribute to this by becoming a liquidity provider (LPs). Another significant difference with Uniswap (V2) is in how SushiSwap pays out to liquidity providers. Instead of earning a 0.3% fee as per Uniswap, SushiSwap pays out a lower 0.25% fee on all trades to LPs. However, another 0.05% of the earnings are pooled together and awarded out to all holders of SUSHI tokens, thus providing an incentive to join the platform.
What Else Could You do on SushiSwap?
Aside from the swapping and pooling of assets, as we noted thus far in our SushiSwap review, there's a lot more than you can do. This, once again, is a big differentiator compared to Uniswap, as SushiSwap offers a lot more services on its protocol. Here are some examples:
1. Earn Yields Through the Onsen Programme
SushiSwap has the Onsen Programme, which is a yield aggregator service that allows DeFi projects to farm – or accrue – liquidity through SushiSwap and its users in order to build up their own platform. Think of this as an accelerator for startups or some form of crowdfunding.
Many DeFi protocols are already setting up yield instruments on SushiSwap in return for highly lucrative yearly rewards for SushiSwap users, some upwards of 10,000% as of writing this SushiSwap review.
2. Lend Assets and Leverage Trades Through Kashi
Kashi is SushiSwap's native service that offers lending markets and leveraged trading with highly elastic and attractive rates. As for lending, you can lend out your assets for other users to borrow with algorithmically set interest in return for you to earn yields, with an isolated market that mitigates risk and excess volatility.
You can then borrow assets to gain exposure without having to sell your assets. The value of the borrowed tokens can be up to 75% of your collateral.
3. Stake xSUSHI Through SushiBar
As we hinted at in our SushiSwap review, SUSHI token holders are eligible to earn 0.05% of fees collected from all the swaps on SushiSwap. You can earn this yield by staking SUSHI tokens through the SushiBar, where you can earn xSUSHI in return.
This doesn't just give you the right to passively earn staking rewards – which are accrued at 9.99% annually at the time of writing – but also the ability to take part in SushiSwap's on-chain governance. You can then redeem SUSHI from xSUSHI at any time.
4. Interact with Gas-Efficient dApps with BentoBox
BentoBox is another service for our SushiSwap review, where so-called “mini dApps” can be built and natively integrated on-chain with SushiSwap. This innovative system allows users to access dApps, and earn yields through them as one would with DeFi.
However, its unique design makes it so that running these dApps through BentoBox incurs fewer gas fees for transactions, as it remains a bit problem with Ethereum. However, the only dApp available on BentoBox now is Kashi.
What is SushiSwap's SUSHI Cryptocurrency Token?
The native currency of the SushiSwap protocol is SUSHI tokens, and is the main utility crypto on the platform. SUSHI is a very popular trading pair on SushiSwap that is widely available through many liquidity pools.
Mainly, SushiSwap intends that SUSHI is used as a governance token, which represents shares that users can propose and vote to make protocol-wide changes. While initially intended to be infinite, users later voted to cap the total token supply to 250,000,000 SUSHI.
Thankfully, changes have been made to avoid another Chef Nomi situation from happening again. SushiSwap's SUSHI tokens have risen dramatically in value since their launch just a few months ago. At the time of writing this SushiSwap review, a single SUSHI is worth around $17.67. This marks a gigantic 3,600+% gain from its all-time lows in November 2020. With a market capitalization of $2,248,512,999, SushiSwap's SUSHI is now the 61th-most valuable cryptocurrency on the market.
What do SushiSwap's Future Roadmap Updates Look Like?
Although already a well-developed protocol, SushiSwap is committed to a very ambitious roadmap timeline for new features to roll out in 2021. Some of these have already been completed as of this SushiSwap review, such as the BentoBox lending market.
In the future, we'll soon get to see a V2 iteration of SushiSwap's AMM, “Mirin.” The implementation of Mirin will see the introduction of franchised pools, dynamic yield rebalancing, liquidity provider curve options, and more.
However, a lot more is being planned that will benefit the platform as a whole, such as the creation of “Miso” smart contracts, as well as Layer 2 scaling solutions that should alleviate some of the congestion on the Ethereum blockchain. They'll also be working on more cross-chain integrations with Rune and Moonbeam, as well as rolling out SushiSwap on the Polkadot multichain. More partnerships and projects are planned, too, such as working with FRAX, DSD, and BAO.
SushiSwap Review – Conclusion
In finalizing our thoughts for this SushiSwap review, we're amazed to see how such a young project has grown so rapidly in not only scale but sheer functionality. SushiSwap has shown us that an exchange can be more for just trading tokens, as it could open a window for users to enjoy and profit from a whole heap of services, all hosted on the same platform. We'll need to wait and see if Uniswap's dominance will be threatened, but SushiSwap is no doubt a very feature-packed DEX for your money.
Ease of Use
Long Term Sustainability
- A lot of liquidity pools (trading pairs) to choose from with plenty of liquidity locked to ensure competitive prices.
- Offers plenty of great and lucrative add-on services for users aside from token swapping and pooling – lending, borrowing, yields, staking, etc.
- SUSHI token holders, even for non-LPs (liquidity providers) can earn a portion of protocol-wide trading fees.
- Multichain support and integration with many blockchains ensure that users can switch networks when needed to find better prices or lower fees.
- Strong commitment to future updates with Layer 2 scaling solutions, optimizing dApps and smart contracts, as well as new features and partnerships.
- User-interface and naming schemes for different services can be difficult for new users to understand.