be a defi with sushi
The Beginner’s Guide
SushiSwap is a software running on Ethereum that seeks to incentivize a network of users to operate a platform where users can buy and sell crypto assets.
Similar to platforms like Uniswap and Balancer, SushiSwap uses a collection of liquidity pools to achieve this goal. Users first lock up assets into smart contracts, and traders then buy and sell cryptocurrencies from those pools, swapping out one token for another.
One of a growing number of decentralized finance (DeFi) platforms, SushiSwap allows users to trade cryptocurrencies without the need for a central operator administrator.
This means that decisions relating to the SushiSwap software are made by holders of its native cryptocurrency, SUSHI. Anyone holding a balance of the asset can propose changes to how it operates, and can vote on submitted proposals by other users.
Who created SushiSwap?
Note: Sushiswap is undergoing a soft rebranding in naming to simply ‘Sushi.’
SushiSwap was created in 2020 by a pseudonymous individual or group called Chef Nomi, along with co-founders sushiswap and 0xMaki.
The founding team copied the open-source code used by Uniswap to create the foundation for SushiSwap.
SushiSwap then attracted users by promising SUSHI token rewards if they locked up funds in a special pool on Uniswap. Once the code for Sushiswap was ready, the funds in that pool were transferred to SushiSwap.
Before the funds were moved to SushiSwap, however, Chef Nomi shocked users by removing some $13 million in funds from the pool.
Amid fears that Chef Nomi had absconded with these funds, the pseudonymous founder gave control of SushiSwap to Sam Bankman-Fried, the head of a cryptocurrencies derivative trading firm called Almeda Research.
Several days later, Chef Nomi returned the liquidated funds to the pool and apologized to users. The locked funds were then moved as planned, with Bankman-Fried overseeing the process.
How does SushiSwap work?
SushiSwap’s core function is to mirror a traditional exchange by facilitating the buying and selling of different crypto assets between users.
Rather than being supported by one central entity, tokens traded on SushiSwap are maintained by smart contracts, and users lock crypto on the software that can then be accessed by traders.
Of note, those who trade against locked assets pay a fee that is then distributed to all liquidity providers proportionally, based on their contribution to the pool.
Liquidity providers contribute to SushiSwap pools by connecting their Ethereum wallet to the SushiSwap farming software and locking two assets into a smart contract. For example, SushiSwap’s USDT/ETH liquidity pool consists of equal values of USDT and ETH deposits.
Buyers can then swap tokens within the pool based on the protocol’s rules. Smart contracts running SushiSwap take the amount of tokens from the buyer and send an equivalent amount of tokens back, keeping the total pool price constant.
In exchange for maintaining liquidity in these pools, providers are then rewarded with protocol fees, along with a portion of the 100 newly minted SUSHI daily.
Providers can reclaim their funds whenever they wish, along with their “harvest”, which is the cryptocurrency earned from farming.
Users wishing to earn more cryptocurrency after harvesting their SUSHI can make use of the SushiBar, an application that allows them to stake their SUSHI to earn the xSUSHI token, which is composed of SUSHI tokens bought on the open market with a portion of all the fees generated on the exchange.