Decentralized exchange is the latest trend nowadays, and an up-and-coming cryptocurrency token will leave you hungry for more. Launched in August 2020, SushiSwap (SUSHI) is a platform that allows you to swap various crypto—that’s actually precisely why it has the word “Swap” on the second half of its name. We can’t explain the first half, though; we just assume that the original developer simply liked sushi.
While the token aims to have a fun, happy-go-lucky environment, SushiSwap shouldn’t be taken lightly. In August 2021, the decentralized exchange already had more than $3 billion in liquidity. Not only that, but CoinMarketCap also noted that the crypto’s price increased by over 1,500%.
So, if you want to join in on the fun and become a “sushi chef,” here’s everything you need to know about SushiSwap before fully committing.
It’s Based on Uniswap’s Code
As mentioned, SushiSwap is a decentralized exchange, but it’s specifically called an Automated Market Maker (AMM). On this kind of platform, users can trade crypto coins or tokens. However, if you’re looking for a central authority managing these ongoing trades, you won’t find it here. Instead, the platform uses mathematical formulas to automatically set prices and process trades through smart contracts.
You might be wondering: where do these crypto funds come from? It’s a question that many crypto enthusiasts have asked at some point. To put it simply, SushiSwap has massive pools of funds, a.k.a liquidity pools. In exchange for rewards, users of the platform lend out some of their own crypto to these pools.
That said, SushiSwap isn’t the pioneer of AMM. In fact, it’s based on another popular AMM platform known as Uniswap (UNI). Chef Nomi, the anonymous developer of SushiSwap, essentially used Uniswap’s code to develop SushiSwap.
SushiSwap Is Very Much Like a Vampire
Upon launch, SushiSwap was immediately faced with a dilemma. The developers needed to find a way to draw in users who were willing to offer liquidity via lending their crypto. The thing is, this is a concept that Uniswap was already using, so SushiSwap needed to be even more unique and offer incentives so that users would be willing to transfer to a brand-new exchange platform.
Thus, Chef Nomi came up with SushiSwap tokens as incentives. Users will be able to earn these tokens by depositing to SushiSwap’s platform. Not only that, Chef Nomi had a sneaky idea to make SushiSwap stand apart from its competitors. You see, users had to deposit their Uniswap token to be rewarded on SushiSwap. As a result, users would end up earning more than they would be able to on Uniswap.
Experts refer to this strategy as a “vampire attack” because it caused Uniswap’s liquidity to be drained and transferred over to SushiSwap. As a result, SushiSwap was able to garner $810 million in crypto funds. However, this caused both platforms to increase in popularity, and while Chef Nomi probably intended for Uniswap to not be as popular anymore, it still continued to attract more users.
The Original Developer Attempted a Rug Pull
That being said, SushiSwap had its fair share of controversies. During the early stages of SushiSwap, Chef Nomi did something known as a “rug pull,” which is a common scam wherein a developer takes the investors’ funds for themself. Last September 5, 2020, about a week after SushiSwap was launched, Chef Nomi siphoned about 20,000 Ethereum and 2.5 million SushiSwap tokens. During that time, the amount he stole was worth more or less $14 million.
Naturally, the SushiSwap community was frazzled and upset by what happened, but the controversy didn’t put an end to the platform. The CEO of crypto exchange FTX, Sam Bankman-Fried, who happened to be an early investor of SushiSwap, took over the project instead. He then donated about 5 million SushiSwap tokens to keep the platform going.
Afterward, a brand-new team was put into action to run the project. Fortunately, Chef Nomi apologized for what he did and decided to return everything he took.
There Are Several Things You Can Do With SushiSwap
Users enjoy what SushiSwap has to offer because there are many things you can do, including:
- Borrow – You can borrow crypto after giving up collateral.
- Swap – You can trade one crypto for another one if you’d like. For instance, you can easily convert your USD Coin (USDC) into Ethereum (ETH) without a lot of hassle.
- Lend – You can lend out your money to other crypto enthusiasts and earn interest.
- Farm – You can deposit your crypto into one of SushiSwap’s many liquidity pools to receive rewards.
- Stake – You can also deposit your SushiSwap tokens and receive even more rewards.
Having an Account Isn’t a Requirement
SushiSwap’s exchange is definitely much different than the centralized crypto exchange used by many others. For one thing, you’re not required to create an account. In fact, you don’t even have to undergo a stringent identity verification process.
To start using SushiSwap’s platform, all you need is a crypto wallet. On the app, you simply have to connect your wallet account, and from there, you can start swapping, lending, borrowing, etc.
As you can imagine, it’s definitely much faster than the typical centralized exchange. However, the only possible issue you might come across is that you need to have crypto funds in your wallet already.
It’s a Governance Token
Believe it or not, but SushiSwap is a governance token, which means that holders have the right to vote and decide on the future of the exchange. If you purchase SushiSwap, you have the opportunity to make votes.
The Market Is Very Competitive
That said, it’s important to remember that SushiSwap isn’t the only decentralized exchange out there that’s taking the world by storm. In fact, Uniswap still continues to have a significant number of daily trading activities.
So, if you’re thinking about buying SushiSwap, take a look at all of its competitors first so that you know for sure that you’re getting the right decentralized exchange for you and your needs.
Conclusion
Investing in crypto is and always will be risky, so you really need to have a good idea of the different coins and platforms you’re interested in. If you’re eyeing SushiSwap, we hope this article taught you everything you need to know.
