Sushiswap

SushiSwap is an Ethereum-based decentralized exchange that lets you swap a vast array of tokens, as well as engage in other finance services.

What is SushiSwap?

SushiSwap is an Ethereum-based decentralized exchange that lets you swap a vast array of tokens, as well as engage in other finance services. It has no centralized authority or middlemen. Instead, it relies on smart contracts—or code that automates processes—and liquidity provided by other users to complete trades. SushiSwap is similar to Uniswap, which also runs on Ethereum, as well as the Binance Smart Chain-based PancakeSwap.

The history of SushiSwap

SushiSwap launched in August 2020 and quickly ran into controversy. The pseudonymous creator Chef Nomi and his collaborators copied (or forked) the open-source code from Uniswap, but made a key change: the addition of a governance token, SUSHI, which users could buy and earn to have a say in the future of the DEX.

Along with that notable change, SushiSwap wanted to crush Uniswap and take its throne as the most popular Ethereum DEX. The creators devised a “vampire mining” scheme to drain liquidity out of Uniswap via incentives: by providing SUSHI in exchange for users’ Uniswap liquidity pool (LP) tokens. Those LP tokens would then be exchanged for the original assets put into the Uniswap liquidity pools, thus creating liquidity for SushiSwap instead.

How does SushiSwap work?

Like Uniswap, SushiSwap is built on an automated market maker (AMM) system that uses the aforementioned smart contracts to complete transactions. Tokens are provided by other users via liquidity pools. Other SushiSwap users lock up their funds in token pairs to these pools, which provides the funds needed to complete swaps. Those users are then rewarded with a small percentage of fees generated by trades, a process called yield farming.

Beyond token swaps, SushiSwap offers other DeFi features, such as the ability to stake SUSHI coins in the network and earn rewards, as well as participate in lending services and purchase newly-offered tokens DeFi startups via its MISO service.