Decentralized finance has seen incredible growth and adoption since 2020 and has more than 60 billion worth of total value locked under various Defi verticals of Token swapping, Yield Farming, Liquidity pool, Lending & borrowing. Decentralized exchanges like AAVE, UniSwap, PancakeSwap Compound, SushiSwap, etc have given the right kind of platform for crypto investors to experience all kinds of decentralized financial services allowing them to make that extra bit of passive income against their crypto assets.
Today we will explore one such innovative Defi platform named SushiSwap.
SushiSwap Shots :
- SushiSwap was launched in September 2020 as a fork of Uniswap.
- SushiSwap was founded by the pseudonymous entity known only as Chef Nomi.
- It is a Decentralized exchange based on the Ethereum blockchain which supports Yield Farming, Liquidity pool, Crypto lending, and borrowing, etc…
- SushiSwap DEX uses the automated market maker (AMM)concept to support crypto trading on its platform.
- The total value locked on SushiSwap Dex is around 2.9 billion
Now that you are aware of the Sushiswap dex, in brief, it’s time to define
What The Heck Is SushiSwap & Why It Is So Special?
SushiSwap is an Ethereum based decentralized exchange that makes use of the Automated Market Maker model instead of the Order book, to facilitate an array of Defi functionalities like
- Token Swapping
- Yield Farming
- Crytpo lending and borrowing
Without relying upon any centralized authority.
What Makes SushiSwap Special?
Unlike centralized exchanges like Coinbase, Robinhood, KuCoin, Binance, the Defi exchange like UniSwap and SushiSwap doesn’t rely on the order-book, instead, they let people like us provide the assets and overall liquidity using liquidity pools, to support the AMM functionality and enable the trading request.
A liquidity pool is a smart contract holding a pair of assets giving one another value.
Sushiswap is a true manifestation of decentralized crypto, where it provides the following services:
- There is no single authority or middleman to snatch the fee instead the fee directly goes to the Liquidity providers
- Unlike traditional centralized exchanges, using Sushi can be much simpler and faster to use when it comes to buy and sell cryptocurrencies.
- This Defi exchange doesn’t require you to go through the complex KYC process, they hardly care for your personal info.
- Also, they provide you an extra source of earning in the form of crypto by allowing you to stake, pool, lend or borrow your idle assets.
- Also unlike UniSwap, SushiSwap rewards liquidity providers with 0.25% of pool fees + 0.05% paid to SUSHI token holders.
- Also unlike UniSwap which closed its UNI token farming period, SUSHI yield farming remains alive and well, with rewards in some pools reaching as high as >80% APY.
How It All Started For SuhiSwap?
SushiSwap platform took its first breath in Aug 2020, where the pseudonymous creator Chef Nomi and other collaborators forked the open-source code from Uniswap Dex, made some key modifications to bring in SUSHI as a governance token that can allow users to trade and have a say in the future of the SushiSwap DEX.
SushiSwap ran into trouble soon after its launch, due to the controversial Vampire mining feature, which was devised to drain the liquidity out of the Uniswap pool, using a reward scheme, that provided SUSHI in exchange for users’ Uniswap liquidity pool (LP) tokens. Those LP tokens would then be exchanged for the original assets put into the Uniswap liquidity pools, thereby draining UniSwap’s liquidity and creating a liquidity pool for SushiSwap instead.
This vampire mining intention to outcompete UniSwap was not a welcoming move for the creators, also the founder didn’t stop here and one of the founders Chef Nomi reportedly cashed out about $14 million worth of SUSHI from the DEX’s developer funds for Ethereum?—?on Uniswap, which led to to the demise of SushiSwap as its price nosedived. This really generated a lot of hatred for this promising Defi project among the SuhSwap community
Bank Fredman The Saviour :
Nomi though decided to reverse course and returned the funds, and ultimately decided to quit from SushiSwap. Sam Bankman-Fried, head of Alameda Research and centralized derivatives trading platform FTX, took over the charge & oversaw the successful completion of the vampire mining campaign.
Sam passed on the control to SushiSwap trusted community to ensure the very fabric of Decentralization remains intact, since then SushiSwap has grown leaps & bounds and has not seen any such mishappening.
“Quite a start, isn’t it ?”
How Does SushiSwap Works?
Now that you are aware of the crazy history of SushisSwap, it is time to go deeper and learn how the heck it works?
SushiSwap a UniSwap Fork, is an AMM: Automated Market Maker system that is driven by smart contract blockchain rules to process the user transactions. AMM smart contacts are responsible to create and manage liquidity pools of tokens and deciding upon the price of these tokens based on a mathematical algorithmic formula.
How To Use SushiSwap?
So if want to be a Defi Chef with Sushi, you can do so with ease.
For Token Swapping: All you have to do is
- Visit: https://app.sushi.com/swap
- Select Swap options
- Connect your wallet to the platform,
SushiSwap uses the ETH as a gas fee to access the tokens in your wallet, you will be prompted to agree to a small fee associated with this initial connection process. This fee is mandatory as it is a fee charged by the Ethereum blockchain. So
Do ensure that you have a sufficent balance of ETH in your digital ord hardware wallet, so that transaction fee can be paid
- Then go ahead & Select which tokens that you want to swap, set the amount, and click on the Swap button, that’s it you will be done with your first token swapping.
For Liquidity Pooling :
- Go to https://app.sushi.com/pool
- If you are not yet connected to your Ethereum Wallet, do so as it will be required to perform pooling functionally
- Click on Add event button
- Click the liquidity tab and select the input tokens to create your pool (Please note that the two token amounts need to match each other in monetary value! e.g. SUSHI $100–ETH $100)
- Allow SushiSwap to access your tokens
- Confirm “Adding Liquidity” and you will be done!
Risk You Should Factor In While Using Pool Option:
While Defi platforms like Sushiswap, UniSwap has some really cool features to help you earn some decent income, you should do your own research before making the choice of platform to do so. As there is a considerable amount of risk associated with such platforms. Risk like an impermanent loss is very much prevalent, To learn more about impermanent loss associated with Liquidity pool & to further decode what is liquidity pool please visit :
Defi Concepts: What Is Liquidity Pool & How Does It Work?
What is Liquidity Pool & How To Earn From Liquidity Pool in Defi Ecosystem?medium.com
Similarly, you can use Sushiswap to:
- Lend your wallet tokens for extra income & also borrow another token from the pool to use for buying to trading another asset, i will leave you guys to try this functionality by clicking the below URL’s
- For lending: https://app.sushi.com/lend
- For Borrowing: https://app.sushi.com/borrow
Closing Remarks:
SushiSwap has come a long way to compete against UniSwap one of the market leaders in the Defi space. Sushiswap stands out in the context of community-based governance and also the reward which these community members generate for their services, by providing their assets in the pool. SushiSwap has come a long way and has already expanded considerably since its controversial start and transfer of power. They have launched multiple suites of products as shown below
- Multi-chain AMM: Cool Collection of BlueChip Defi platforms
- Kashi Lending & Leverage Platform: With a flexible interest rate
- Beatbox Dapps: innovative Dapp ecosystem
- SushiBar: Efficient staking & governance platform
- Onsen: Offers best Yield for your tokens
So I feel:
SushiSwap ongoing Defi innovations are here to stay and poised to offer, some really cool returns and governance control, to its loyal investor community. Having said that like many other Defi, Dapps & DEXes, SushiSwap also is not free from the following ailments of being Decentralized :
- Market manipulation
- Impermanent loss
- Bank run
- Rug Pull
So to become a true market leader it has to win the trust of its investor by becoming super secure and reliable when it comes to safeguarding the investor's money.
Food for thought :
“SushiSwap, UniSwap, PancakeSwap have shown how our future of banking will look like? If the decentralized financial ecosystem somehow manages to mitigate the influence of a regulatory authority(Which I feel will try to create some nuisances for sure) in the coming future, this innovation is truly poised to unlock financial benefits for one and all.
Disclaimer!
Opinions expressed here at CryptoWise are not investment advice and are only for educational purposes. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency, or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility
Remember!
This article was originally published on my medium account here:
https://medium.com/crypto-wisdom/sushiswap-cookbook-for-absolute-beginners-16b8c21d67a5
