SushiSwap is an open-source Automated Market Maker that was forked from Uniswap and built on the Ethereum blockchain. It’s a decentralised exchange that allows users to swap one cryptocurrency for another. It was founded in 2020 by an anonymous individual who went by the moniker Chef Nomi, who has since left the project.
Despite SushiSwap’s short history, the platform has already seen itself under the spotlight of controversy. Chef Nomi’s attempt to leave the network involved almost siphoning $14 million worth of Ether (ETH) with them, causing public outrage. The fire has since been quelled by its co-founder, who also stepped down from their leadership position in September 2021.
Despite the controversy surrounding the network, its native tokens, SUSHI, and xSUSHI, have maintained a relatively decent price point, spiking at over $22 in the early-2021 high and now hovering between $7-8. It also remains one of the most well-known AMMs, despite being ranked below 90 by coin market cap.
How does SushiSwap Work?
Most cryptocurrency exchanges are run by companies, essentially making them centralised entities. Users who want to transact with a lot more control may seek decentralised alternatives, such as Automated Market Makers. AMMs use smart contracts to create digital markets for any token pair.
An algorithm dictates pricing based on supply and demand—taking subjective human decisions out of the equation. SushiSwap is one such AMM, having succeeded the ever-popular Uniswap, with a goal to overtake the latter in terms of coin pair liquidity.
Rather than two people exchanging with one another, accessing an AMM will allow you to swap your existing cryptocurrency for another using smart contracts, keeping the other party’s wallet address anonymous. Moreover, rather than having multiple price exchanges spanning inconsistent pricing, the algorithm only allows a single price exchange for each crypto pair. So if, hypothetically, the system dictates that 1 BTC equals 14 ETH, you won’t find another listing with a different exchange rate.
AMMs are run by liquidity pools, which are funded by people who receive a commission from the trading fees. Anyone can join these pools—as long as you contribute both cryptos in a pair.
How is SushiSwap Different From Other AMMs?
While SushiSwap is fundamentally like any other decentralised exchange in that it facilitates trade between cryptocurrency pairs with the help of smart contracts, its main selling point lies in its reward system. Older blockchains like Uniswap offer liquidity pools that allow anyone to contribute crypto pairs that act as capital for the exchange to function. Participants receive a percentage of transaction fees as a reward, but the earning opportunities usually end there.
SushiSwap takes the user earning capacity up a notch by also offering staking rewards. Staking SUSHI involves leaving a number of tokens in the network for a predetermined period in exchange for rewards. For one, all stakers receive 0.05% of all transaction fees. Staked SUSHI can also be traded for xSUSHI, which is another token native to the network. It appreciates and depreciates in value and is listed on exchanges, and has functionality in other platforms (such as CREAM), making it a highly valuable asset.
Should You Invest in SUSHI?
Many analysts believe that there’s a rainbow road ahead for SushiSwap, as decentralised platforms grow in popularity with privacy concerns and an overall healthier public reception toward cryptocurrency use. Less-than-conservative predictions believe that SUSHI may turn over a new leaf in 2022, with a possibility of breaching its all-time high to up to $40. While these values are all speculative and are tinged with a hint of imagination, they’ve been enough to keep the market on its toes.
Moreover, while SushiSwap’s 2020 ordeal will forever be etched in history as a major red light, the platform’s original owner has since left the team. SushiSwap is now being taken over by Sam Bankman-Fried, the owner of the seasoned FTX Cryptocurrency Derivatives Exchange—and a figure who clearly has a lot more experience in the DeFi sphere. The boost in investor confidence has been enough to keep SUSHI’s value from plummeting, so there’s certainly hope for the coin in the future.
Where investment is concerned, SushiSwap is something to watch out for and potentially purchase, especially when the market is experiencing a coveted dip. But it’s not recommended to pour all your eggs into this one basket, so hopeful crypto holders best look into diversifying their options.