The DeFi industry has seen its fair share of rather unusual projects. When SushiSwap was introduced, many people assumed it was a joke. That is clearly not the case, but there is still a bit of a learning curve.
SushiSwap is an Evolution
People familiar with decentralized exchanges and DeFi will be aware of Uniswap. It is a very popular trading platform for DeFi and other Ethereum-based tokens. It has become the go-to platform for a lot of people lately, resulting in a hefty trading volume increase. However, there is always room to take things to the next level, which is exactly what SushiSwap aims to achieve.
It borrows a lot of elements from Uniswap. The core design is nearly identical, with a few community-oriented features on top. It is not an extension of Uniswap’s platform however. Both entities need to be treated separately, as they do not share liquidity whatsoever. The only correlation is how they both provide a similar core design, but the implementation of different features sets them apart quite well.
Why Should Anyone use it?
Taking an existing concept and adding a personal flavor to it is interesting. Getting people to use it, however, is not as straightforward. Uniswap liquidity providers earn trading fees when they are actively contributing. Withdrawing money means no more passive income will be generated. It is a model that works well, but is not necessarily ideal.
SushiSwap, on the other hand, allows users to earn SUSHI tokens for providing liquidity. These tokens will allow providers to keep earning passive rewards even if the original liquidity is withdrawn again. Further revenue will be generated in SUSHI, creating a constant passive revenue stream over time.
During the initial stage, users will earn 10x the amount of SUSHI tokens compared to normal. This will last for the first two weeks, after which the block reward will reduce to 100 SUSHI again. Tokens are distributed equally to stakes in every pool. That being said, liquidity providers for SUSHI-ETH will keep earning double rewards until further notice.
As far as trading fees are concerned, the distribution is a bit different from Uniswap. More specifically, the latter platform offers 0.3% of trading fees to liquidity providers. Through SushiSwap, 0.25% is distributed directly, with the remaining 0.05% converted to SUSHI and distributed to token holders. Considering how SUSHI will keep yielding passive rewards for holders, this creates a rather interesting ecosystem.
Security Audit Pending
As is usually the case, an audit needs to be performed. A lot of DeFi projects seem to forego this crucial step, for a wide variety of reasons. SushiSwap has not been audited by an independent firm as of yet. While there was an initial testnet without major issues, there is a big difference between the two.
As such, the team is inviting auditors to take a look at the smart contracts. A “bounty” of 5ETH is offered to the first company capable of completing this process. Until this happens, the MasterChef contract for farming remains unaudited. It is something to keep in mind before contributing a lot of LP tokens to this contract, after all.
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