SushiSwap initially started out as a controversial but popular Uniswap fork. Half a year later, the project stands as DeFi’s top 10 DeFi protocol and second-best decentralized exchange. Now that it directly contends with its older brother Uniswap, it is time to explain what the DEX is all about with an extensive SushiSwap review.
Decentralized exchanges (DEXs) are DeFi’s top projects. They are a fundamental part of the ecosystem that enables everyone to trade and invest in a permissionless way, behaving entirely unlike anything that we see with CEXs.
Just like centralized exchanges, decentralized ones also face constant pressure from the community, as well as competition from rivals. There is not one month in this space during which various protocols do not replace each other. Following the spirit of capitalism, DeFi investors continuously search for the most efficient and productive platforms that exist.
One such competitive platform that managed to take the spotlight from the market’s brightest projects is SushiSwap. Although it started out plain and simple, introducing only a new interface and a farmable governance token, SushiSwap gained millions of dollars only hours after launching its yield farming platform.
Today, Sushiswap is quite a different project compared to what it once was. It still offers the same services, but its products have evolved to a level that no one has expected. If you have trouble deciding on which DEX to trade, you have come to the right place. Let’s explore one of DeFi’s most bullish projects with an in-depth SushiSwap review. Is it really the best DEX?
What is SushiSwap?
SushiSwap is a decentralized exchange that processes token swaps and yield farming through an Automated Market Maker (AMM) smart contract. Running on Ethereum, the exchange is an advanced fork of the Uniswap protocol, another DEX running with the same AMM system.
The exchange financially incentivizes liquidity providers to bring tokens to the platform by rewarding them with fees. Specifically, these users are rewarded with the costs that other traders pay to perform token swaps.
To report prices, SushiSwap utilizes a number of decentralized oracles. The list includes the SushiSwap TWAP oracle, Compound’s Open Price feed oracle, and oracles created by Chainlink. Moreover, arbitrageurs also play a part in ‘delivering’ accurate prices by minimizing price differences on all trading pairs.
At the time of writing, SushiSwap sits at number six on the DeFi Pulse leaderboard and hosts a grand total of $3.69 billion dollars in collateralized assets. On the other hand, its biggest rival Uniswap is ranked fifth and hosts $3.97 billion.
The DEX owes a lot of its success to intelligent and tactical thinking. By bringing better features than their competitors, SushiSwap reached more than $1.6 billion in liquidity in less than a month. But as the features were temporary, so was the platform’s popularity. A few controversies did not help either, and SushiSwap went from being DeFi’s best project to being the worst one.
As a result, no one wanted to touch the protocol for months. It was only after new developers began working on SushiSwap that the exchange could earn the community’s trust again.
The history of SushiSwap
SushiSwap was created by Chef Nomi, an anonymous developer working under the pseudonym of a character from the famous online card game Hearthstone. The project gained momentum around August 28 on Twitter when users began talking about the possibilities of gaining extra profit by migrating Uniswap’s liquidity to a forked platform.
The process was given the moniker ‘vampire mining,’ as a reference to SushiSwap leaching liquidity from the former platform. After being launched at the very start of September, the DEX only offered three liquidity pools: SUSHI/ETH, USDC/ETH, and USDT/ETH.
SushiSwap initially attracted a lot of the market’s liquidity solely by introducing important DeFi features before Uniswap did. While the other exchange lagged behind, SushiSwap introduced a governance model along with its SUSHI token.
For the first two weeks, liquidity providers have earned 1,000 SUSHI tokens per block. Seeing that the new platform plans to reward yield farmers with ten times more APR for a limited time, the entire DeFi community jumped onto the SushiSwap bandwagon. And yes, even the most loyal Uniswap fans have switched over.
Traders ended up farming on pools that provided lower fees, as SushiSwap charged 0.25% in comparison to Uniswap’s 0.3 fees. However, the main incentive to join the new platform was the SUSHI token. All farmers earned an additional 0.05% in rewards in the form of SUSHI.
Practically, those who were bullish on SUSHI’s long-term future migrated, while those who preferred higher fee rewards stayed with Uniswap.
After only two weeks, the project collapsed under its own weight as Chef Nomi refused to back down on the issue of locking $14 million in assets from SushiSwap’s dev fund. He was then replaced by a team of reputable blockchain developers who began quietly working on the exchange.
Why is SushiSwap so popular?
SushiSwap is mainly popular due to its large selection of liquidity pools and its community-focused approach. It is one of the few decentralized exchanges that have sizable liquidity, to the degree of competing with centralized trading platforms.
Traders commonly think of SushiSwap as an alternative for Uniswap. Even though the exchanges are practically the same, many dislike the fact that Uniswap stalls in terms of development. The project has introduced no notable feature since launching the UNI token and its governance model.
On the other hand, SushiSwap creators work hard on delivering innovative features that help the platform stay competitive. We will discuss some of the features in the sections below.
SushiSwap’s unique features
Apart from a few new features, SushiSwap works mostly the same as Uniswap. If you know how one DEX works, you will find it easy to use the other one as well.
SushiSwap’s core features are token swaps and yield farming. Token swaps are for trading, while yield farming is for earning interest on existing assets. If you have been browsing Crypto Twitter for more than 5 minutes, you probably know what these two concepts are. Instead of regurgitating information, we will discuss the newer features that SushiSwap uniquely offers.
Onsen (Menu of the Week)
Previously, the exchange offered menus that change every week. Why is that even a thing? Yield farmers, being the cash-lovers they are, would constantly search for new LP opportunities. Usually, they would have to switch back and forth between different platforms to farm on the most profitable pool.
Since the profitability of a pool frequently changes, especially with the arrival of new users, the team thought of introducing a ‘menu of the week.’ Governance participants could vote on which LPs to feature every week, which in return helped with changing the protocol’s variety and token offering.
Later, the community approved the Onsen sub-section that effectively replaced the weekly menus. Onsen pools are different exclusively in terms of lasting longer and featuring more pairs at a time. In total, LPs on Onsen last for 60 days and feature 58 liquidity pairs.
According to the team, Onsen’s design enables it to bring new liquidity to the DEX while at the same time decreasing slippage, expanding LP offerings, and creating synergic relations with other projects in DeFi.
Onsen has a cap for projects based on their market cap:
Gem (1M to 5M market cap) - A maximum of 20 trading pairs
Lowcap (5M to 25M market cap) - A maximum of 25 trading pairs
Midcap (25M to 100M market cap) - A maximum of 13 trading pairs
BentoBox is a lending feature that was revealed last December. Although it was announced for a launch in January, the platform has still to launch. Many projects feature lending opportunities, so how is SushiSwap’s platform different from the rest?
The standard is to store each token of a trading pair into one contract. On BentoBox, SushiSwap holds all tokens in one vault. This is done not only for lending contracts but other features as well. Moreover, developers will be able to build extensions that can use the BentoBox on other protocols.
According to the original announcement, the benefits of such a model are listed as the following:
Tokens approved in the vault are universally approved on all protocols that use BentoBox.
Funds are managed by each protocol individually, specifically those that the user approves.
Enables low flat gas fees for internal token transfers.
Loans are improved on the BentoBox through the use of multiple decentralized oracles. Previously, the ecosystem saw a rise in dysfunctions related to price reporting as a result of developers using only one or two unreliable oracles. SushiSwap fixes this by offering the user to decide which oracle to use when using the lending platform.
For this purpose, the team will implement SushiSwap TWAP, Compound Open Price Feed, and Chainlink Oracles. Each oracle has its own advantages and disadvantages, which users have to keep in mind when creating a loan.
Community members can implement new features, change existing ones, and direct the protocol by participating in the governance model. Voting is done by locking SUSHI, the project’s governance token.
Ideas can be discussed on the governance forum, and if enough interest is gathered, the team will review and potentially approve the proposal. To reach a quorum, the proposal must collect a total of 5 million SUSHIPOWAH, a specific token gained by locking SUSHI in LPs.
Multisigs, a wallet system that requires multiple signatures, represent SushiSwap’s so-called decision-makers. The multi-sig wallet is made of 9 reputable members from the Ethereum community. They have the power to approve and utilize developer funds. In order for a transfer to be approved, at least six members must sign the transaction.
At the time of writing, the multi-sig members are:
For smart contract changes and proposals, SushiSwap utilizes the Ops Multisig. Only the team’s core members are a part of this wallet system. To change smart or upgrade smart contracts, a transaction must be signed by 3 out of the total five members.
Currently, these are the Ops Multisig signers:
Is SushiSwap safe?
Although the DEX launched in September 2020, SushiSwap has only one completed audit report. Conducted by PeckShield before the project’s launch, the blockchain firm found no critical or high severity issues at the time.
Obviously, such an old report has no value considering that SushiSwap drastically changed over time. At the time of writing, SushiSwap is still in the process of being audited by Quantstamp. While announced in December, there is still no timeline nor update pertaining to the audit’s release.
It is safe to say that even without audits, SushiSwap is secure. Running for at least half a year, the exchange has never been hacked. It is also important to note that the project is run by a reputable team of developers, and even FTX CEO Sam Bankman-Fried has a say in the project.
Moreover, the project’s partnership with Yearn Finance and Andre Cronje has entrenched its position in the DeFi market. Having everything in mind (including the project’s recent performance), we can conclude that SushiSwap is without a doubt completely secure.
SushiSwap vs Uniswap
SushiSwap and Uniswap are eerily similar, as we have pointed several times. After all, the former project is literally based on Uniswap’s source code. So, what is the difference and which one should you choose?
We recommend that you make a decision based on your personal belief of which project is more bullish in the long term. Moreover, take into account the distinctive division between the ‘old wave’ and ‘new wave’ of the two teams that lead these projects.
On the one hand, we have Hayden Adams and his Uniswap team, who represent the old wave in DeFi. Why? Adams is a staunch member of the ‘first’ Ethereum community. The one that we had during the ICO era when crypto first started accelerating towards its modern size. Adams has heavy ties with the Ethereum Foundation and their brightest developers, even Vitalik Buterin!
On the other hand, SushiSwap’s team is perceived to be the new wave of Ethereum. The team is composed of anonymous developers that began BUIDL-ing last year when DeFi did not even host a billion dollars in liquidity. The project is partnered by many newcomers, including Yearn Finance’s famous creator Andre Cronje. As a matter of fact, SushiSwap even became a part of the Yearn Finance ecosystem near the end of the last year, and the teams have established synergic ties that complement the two yield farming protocols.
With that in mind, do you prefer supporting the older or, the newer generation of smart contract developers? There is nothing negative to be said about either group. However, it is clear that Andre Cronje and 0xMaki are heading in a different direction with SushiSwap as opposed to Hayden Adams and his team.
After all the drama, SushiSwap became a serious player in the world of DeFi. Working with a new administration of developers, led by ‘Sushi Chef’ 0xMaki, the exchange lost not only its bad reputation but its status as a Uniswap clone as well.
By focusing on developing new features, yield farming opportunities, and bringing other DeFi products to a DEX, SushiSwap upholds its relevance in the market and goes beyond.
Today, we see the former ‘vampire protocol’ stand side by side with Uniswap. Although these DEXs head in different directions, it is evident that only one will remain at the top. Are you bullish on the new generation of DeFi developers led by Andre Cronje and 0xMaki, or are you a staunch supporter of the old wave of Ethereum’s OG smart contract developers?