Sushi Swap has come a long way and it looks like there’s a lot more to come. However, there are some caveats. A lot of people are jumping in to invest now because the platform offers generous rewards. However, such rewards do not appear to be sustainable in the long term. In addition, most of the people leading the project are anonymous. Remember that DeFi is on the high-risk side of the cryptocurrency ecosystem, so you should always look for relevant information first before making a decision.

Sushi Swap among the most popular DEXs

SushiSwap is a decentralized exchange that utilizes liquidity pools and automatic market makers to create token swap liquidity in the market.

Sushi Swap first appeared in the summer of 2020, during the DeFi fever, and immediately took the cryptocurrency community by storm. This was due to the so-called “vampire attack” audacious means used when entering the DEX market, and the absurd behavior of an anonymous founder named Chef Nomi afterwards.

However, even after the temporary madness is over, there doesn’t seem to be much change in the popularity of sushi swaps or the price of SUSHI tokens.

As of the time of this writing, Sushi Swap has established itself as one of the most popular Dex with a lockup volume of approximately $2 billion.

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How does sushi swap work?

The principle of operation of sushi swap is similar to uni swap. If you look at the centralized exchange model, there is an order book that matches buyers and sellers. Exchanges utilize market makers to ensure that there is always someone to exchange orders with, thereby maintaining liquidity throughout the market.

However, in decentralized exchanges, this method does not work. The gas fee of Ethereum is so expensive that it is impossible for the market adjuster to access it, and the block time is too slow, which can lead to slippage in which transactions are executed at undesirable prices.

Liquidity pools are the most common method used by decentralized exchanges to solve this problem. It allows anyone on Sushi Swap to contribute to the liquidity pool, which contains both tokens in equal proportions. In the case of the Ether (ETH)/Tether (USDT) pair, a liquidity provider who wants to contribute 1 Ether (ETH) worth $1,000 may have 1000 Tether (USDT).

Upon depositing funds, the protocol delivers a “liquidity pool token” to the depositor’s wallet, which represents their share.

Depositors are now entitled to stake 0.25% of the transaction fees of all those who have used the pool to swap tokens.

When someone appears who has done a token swap using the pool, they always immediately execute the swap order through the existing liquidity. A smart contract is a system that determines the price of an asset based on the remaining token balance in a liquidity pool. If the price in the sushi swap differs too much from the market price, the arbitrator will step in and profit from the difference, and the price will return to the market level.

Anyone wishing to withdraw funds from the liquidity pool can retrieve the original tokens by first burning their pool tokens. However, it is at this point that liquidity providers take on some risk. If the value of one token changes relative to other tokens, it means that the returned value may be less than the initial deposit value. This is called “impermanent loss”. Of course, you might think that the term “non-permanent loss” is not correct, as it means that a user will incur a permanent loss as soon as the token is withdrawn.

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Sushi Swap Sushi Bar

Sushi Swap offers a feature called Sushi Bar. At the sushi bar, users can deposit SUSHI tokens and receive more than SUSHI as a reward. The exchange sets a transaction fee of 0.3% per trade, of which 0.25% goes to liquidity providers. The remaining 0.05% is sent to Sushi in the form of full tokens. All pool tokens in the sushi bar are liquidated daily and used to purchase SUSHI tokens, which are distributed to everyone staking SUSHI in the sushi bar.

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Controversy at launch

Like most decentralized exchanges, Sushi Swap started as a fork of Uniswap. Uniswap was firmly holding the No. 1 position in DEX until sushi swap appeared. Traditional forks were very simple, but sushi swap required a few extra steps. A fork took place before Uniswap held its own tokens. SushiSwap utilizes the basic code that underlies the Uniswap version 2 protocol and has changed it to include its own tokens. That token is SUSHI, which can be harvested by anyone who provides liquidity to the sushi swap exchange. At the time, profit farms were still a relatively new concept, but they gained immense popularity. Owning SUSHI not only gives the holder the right to vote on the governance of the sushi swap exchange but also gives the holder the right to take a stake in the transaction fees paid by the exchange.

Even before the sushi swap exchange was launched, the exchange founders used the uniswap liquidity pool as a bootstrap for the liquidity of SUSHI tokens using the existing uniswap pool. As the exchange started operating, liquidity shifted from uniswap to sushi swap.

With the launch of Sushi Swap, the liquidity of Uniswap has completely dried up, which is why Sushi Swap’s tactic is called “Vampire Attack”. This in itself has sparked a huge debate within the crypto community. However, over the next few weeks, Chefnomimi, co-founder of SushiSwap, took a portion of SUSHI tokens and bought 38,000 ETH (ETH) equivalent to $14 million at the then price of SUSHI. Sushi Swap adorned the front of the article while making it crash. After that, he returned the tokens and even apologized on Twitter.

FTX Exchange Founder Sam Bankman-Fried jumped into the race and took the sushi swap throne. After that, SushiSwap’s multi-signature wallet was distributed to the team, including co-founder 0xMaki, who decided to stay with the project.

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Sushi Swap Forecast: Current/Future Progress

Sushi Swap has recently merged with Yearn Finance as part of a series of mergers related to the latter project. Teams merging with Yearn will typically combine development resources, and in the case of SushiSwap, they will also incorporate liquidity pools.

SushiSwap also recently published an extensive 2021 roadmap. This includes an ambitious cross-chain DEX plan utilizing Moonbeam, which connects parachain with the Polkadot ecosystem and introduces a stablecoin algorithm.

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SUSHI Token Performance

The value of the SUSHI token is showing tremendous volatility along the Sushi Swap platform. It skyrocketed as soon as it was issued, then plummeted on fear of a pump-and-dump when Chef Nomi sold his stake in SUSHI tokens.

In December 2020, after the demand for DEXs increased, the value of sushi (SUSHI) has been steadily rising. With the news of the merger with Yearn and the roadmap, the price is expected to rise further. In January 2021, the price of sushi tripled.

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