For those looking to trade cryptocurrencies on a decentralized exchange (DEX), there are numerous options available across various blockchains, making it challenging to know where to begin.
Since its inception in 2020, SushiSwap has provided users with easy access to a wide array of tokens within the Ethereum ecosystem.
What is SushiSwap?
SushiSwap is a decentralized exchange (DEX) built on the Ethereum blockchain. Created by anonymous developers Chef Nomi and 0xMaki, it started as a modified version of Uniswap. What sets SushiSwap apart is the addition of new features, such as liquidity mining and governance through its native token, SUSHI.
While SUSHI isn't necessary for using SushiSwap, holding the token provides access to extra features, like staking. Furthermore, SUSHI allows users to have voting power in governance decisions, impacting the platform's future direction. Along with voting rights, those who hold SUSHI also receive a portion of trading fees and staking rewards, enhancing its appeal within the decentralized finance (DeFi) ecosystem.
How SushiSwap Works
SushiSwap is based on a decentralized trading model called an automated market maker (AMM) which facilitates peer-to-peer transactions, eliminating the need for traditional exchanges with order books and intermediaries. The AMM uses liquidity pools—funds of specific tokens provided by users—to execute trades, leveraging smart contracts to offer liquidity.
Since its inception in 2020, SushiSwap has evolved beyond trading, offering a range of DeFi tools within the same platform. Users can now engage in yield farming, staking, lending and borrowing, making it a comprehensive Ethereum-based solution for multiple crypto assets, including ERC-20 tokens. The open-source nature of SushiSwap and its smart contract functionality contribute to the dynamic and flexible APRs offered to its users.
Providing Liquidity on SushiSwap
SushiSwap allows you to become a liquidity provider (LP), which means supplying tokens to liquidity pools for the purpose of enabling trades in the decentralized exchange. By participating as an LP, you can earn rewards in the form of a portion of trading fees generated from each transaction. To start providing liquidity, simply connect your wallet, select the tokens you wish to supply, and receive LP tokens as proof of your contribution.
Staking SUSHI in SushiBar
If you hold SUSHI tokens, you can stake them using SushiSwap's SushiBar to earn additional rewards in the form of xSUSHI. Staking with SushiBar also grants you access to SushiSwap's governance system, allowing you to participate in decision-making processes while your tokens earn passive income. To stake your SUSHI tokens, navigate to the staking section on SushiSwap, input the amount you wish to stake, and approve the transaction.
Kashi: Lending and Borrowing Crypto
SushiSwap's Kashi platform enabled users to lend and borrow cryptocurrency. Borrowers must deposit collateral and are charged an annual percentage rate (APR) based on a variable rate. As a lender, you can earn rewards in the form of a variable APR on the assets you deposit. It is essential to understand the risks associated with DeFi lending, as it operates within a largely unregulated environment, and should not be confused with rewards earned from staking tokens with validators. The Kashi platform was launched in early 2022 but would then be deprecated in 2023 for lack of resources and to focus on SushiSwap’s main DEX.
SushiSwap's Evolution with SushiXSwap
On July 2022, SushiSwap introduced an enhanced protocol named SushiXSwap, Similar to our cross-chain DEX with LI.FI, BrainSwap. This cross-chain decentralized exchange (DEX) facilitates token exchanges across numerous networks, not just Ethereum, but also on Optimism, Arbitrum, Fantom, Avalanche, Binance Chain, and Polygon.
Leveraging the LayerZero Stargate protocol, SushiXSwap offers a streamlined user experience by simplifying multi-chain interactions and bridging different networks. The BentoBox smart contract, which acts as a central repository, makes this integration possible within the SushiSwap dApp landscape.
The Dynamics of SUSHI Token
SUSHI, both a governance and utility token, has a capped supply of 250M coins. Currently, 51% of these coins are in circulation. As an incentive, liquidity providers earn SUSHI rewards from trading activities; they get a 0.25% fee, which is proportional to their stake in a specific liquidity pool.
