SushiSwap ($SUSHI) Explained

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Before we begin

We’ve been closely following the events involving SushiSwap and its founder “Chef Nomi”. This article will not be making any comments or conclusions on Chef Nomi’s actions or how SushiSwap is or should be run. This article is simply an explainer on what SushiSwap is and how to use the platform. As with all yield farming projects, SushiSwap involves a huge amount of risk. Anyone intending to participate in yield farming should do full research and consider carefully the risks involved beforehand.

What is SushiSwap ($SUSHI)?

SushiSwap is the newest decentralised finance (DeFi) liquidity pool platform. With SushiSwap, people can add their tokens into the liquidity pools and earn. In this article, we’ll have a look at the Sushi Swap platform and how to participate in the liquidity pool. Anyone can participate.

Sounds interesting? Let’s dive into it.

Summary

  • SushiSwap is a platform that allows anyone to provide liquidity. In return, the person gets rewarded with token(s) and SUSHI tokens. 
  • As of September 4, 2020, there are 1 billion dollars of locked liquidity.
  • Possibility of very high APY (up to 1,000%) on some liquidity pools. You can check the current yields on SushiBoard.

Why is SushiSwap so popular?

Sushi Swap markets itself as an “improved and community-friendly” Uniswap. Unlike a traditional exchange like Binance where they employ market makers, SushiSwap is a community-oriented platform where users provide liquidity. In return, they get rewarded. Indeed, the users are the market makers.

SUSHI token

SUSHI tokens are given as rewards for liquidity mining. The token allows its holders to participate in the governance of the platform and entitles them to a portion of the fees paid to the protocol by traders. For the governance of the platform, SUSHI holders can submit a SushiSwap Improvement Proposal (SIP) which token holders can vote on with their tokens.

Of course, some people also speculate on the prices of SUSHI and the token can be traded on major exchanges such as Binance, FTX and OKEx exchanges.

Advantages of SushiSwap

There is no KYC (Know Your Customer) policy. This means anyone can trade and contribute to the liquidity pools. The platform is permissionless, meaning anyone can contribute millions of dollars without asking for permission. 

Earn tokens from Sushi Swap. SUSHI is Sushi Swap’s native token. When you contribute to the liquidity pool, you earn sushi tokens. You can exchange SUSHI for ETH. 

Sushi Swap model: 0.25% go directly to the active liquidity providers and 0.05% get converted back to SUSHI and is rewarded to sushi holders. 

Sounds interesting? Let’s visit Sushi Swap’s home page.

SushiSwap beginners guide 

When you first arrive on Sushi Swap’s home page, you’ll see this:

SushiSwap home page
SushiSwap home page

Click on “Unlock Wallet” or “See The Menu”, either way you will need to connect your ETH wallet in order to this platform. 

Sushi Swap has the option to use MetaMask or WalletConnect. Pick the wallet of your choice.

Connect wallet

Give permission for Meta Mask or Wallet Connect to connect to Sushi Swap. Once you’re connected, you’re ready to add your tokens into the liquidity pools.

Liquidity pools

You’re presented with various liquidity pools (LPs). Each liquidity pool has a different annual percentage yield (APY).

In this example, I’ll contribute to the Tether Turtle pool. I add my USDT into the liquidity pool. In return, I’ll get a percentage of USDT and SUSHI tokens. Think of Sushi Swap as a “community revenue share” model.

contribute to liquidity pool
Contribute to liquidity pool

To contribute to the liquidity pool, click “Approve USDT-ETH UNI-V2 LP” and give your Meta Mask permission to move your tokens into the liquidity pool. 

Now what? You wait. The “SUSHI earned” box should populate with your earned SUSHI. You can withdraw your SUSHI token anytime by clicking on “Harvest”.

FAQs

Is it risky to provide liquidity to SushiSwap?

The pool could get hacked if the code isn’t audited. There have been cases of hackers draining funds from smart contracts. It helps if the code is audited by a reputable firm. In the case of SushiSwap, it has been given a “security review” (not an audit) by Quantstamp. 10 issues were identified but they do not appear to be fatal. Subsequently, Peckshield had completed an audit on SushiSwap. They found no critical or high severity issues relating to business logistics but 2 high severity opsec issues that need to be fixed through extra care with deployment.

What is the reward model of Sushi Swap?

0.25% go directly to the active liquidity providers and 0.05% gets converted back to sushi and is distributed to active SUSHI holders.

Decentralised Finance (DeFi) series: tutorials, guides and more

With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. We also take a deep dive into popular DeFi topics such as Yearn.finance ($YFI), Balancer ($BAL) and ($COMP).

The DeFi series on this website also covers topics not explored in YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

Learn about Yearn.finance ($YFI) and all its various hard forks and iterations:

For in-depth information other specific DeFi projects, check out our DeFi token guides:

Tutorials and guides for the ESSENTIAL DEFI TOOLS:

More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel and (for now) FREE weekly newsletter so you can be notified as soon as they come out!

The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur.

2 COMMENTS

  1. SushiSwap is not a DEX. It literally is a centralized website that connects to a wallet. Sorry, but anything that is pointing to a website is just simply not a DEX. I true layer 2 DEX is local to someone’s phone or computer. I suggest you look at the only true layer 2 DEX in the world that is able to trade BTC on the LN and ETH on the RN.

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