What is SushiSwap?
Looking for a way to get your feet wet in the exciting world of crypto, but feeling a little fishy about trusting centralized exchanges? Look no further than SushiSwap, the decentralized exchange that's making waves (and rolls) in the world of DeFi. With its sushi-themed branding and innovative approach to liquidity provision, SushiSwap is here to help you put that idle crypto assets to work.
SushiSwap was launched in August 2020 as a fork of Uniswap v2. The project was created by an anonymous developer who went by the name Chef Nomi, and it quickly gained popularity due to its unique incentives for liquidity providers.
SushiSwap's move was described as a vampire attack, where Uniswap LPs were incentivized to migrate their liquidity from Uniswap to SushiSwap in exchange for SUSHI tokens. This was before Uniswap launched its own UNI token.
There was another controversy as well. Chef Nomi, who had been leading the project, sold off his entire stash of SUSHI tokens for Ethereum, which was worth $10M at the time. This caused the value of the SUSHI token to plummet, and many users accused Chef Nomi of scamming the community.
Fortunately, SushiSwap got over this chapter and has since become one of the most successful DeFi protocols on Ethereum. The SushiSwap team went on to expand their product suite in a bid to outcompete other protocols. In 2021, SushiSwap launched its own lending service and a token launchpad.
Things started to take a downturn for SushiSwap towards the end of 2022 when the SUSHI token emissions diluted the token's value. Even though SUSHI was used as an incentive to attract more liquidity to the protocol, the sheer amount of tokens on the market led to the price of SUSHI taking a dive. This event spiralled into an internal crisis for the team, who relied on SUSHI to pay its employees.
How does SushiSwap work?
SushiSwap is a decentralized exchange that was founded by copying the codebase of Uniswap. Since its inception, SushiSwap has expanded and integrated various services such as lending and its launchpad.
Due to the 2023 bear market, SushiSwap was forced to close most of its services and focus solely on its DEX. According to the CEO of SushiSwap, Kashi and Miso had some inherent design flaws that made it difficult to operate in a sustainable manner. For this reason, we are only going to cover how the SushiSwap DEX works.
The mechanics of SushiSwap DEX are the same as on Uniswap. In a liquidity pool, users can deposit pairs of tokens, such as ETH and USDT or DAI and USDC. These tokens are used to create a market for trading, and the exchange rate between them is determined based on their relative supply in the pool.
When a user wants to trade one token for another, they send their tokens to the liquidity pool, and the pool automatically calculates the exchange rate based on the new supply of each token. The user receives the new token at the current market rate, minus a small fee that is paid to liquidity providers as a reward for providing liquidity to the pool.
Concentrated Liquidity
On May 15, 2023, SushiSwap introduced concentrated liquidity to its trading pools. This feature enables LPs to deploy capital around a specific price interval and earn fees within their defined price range.
Another benefit of concentrated liquidity is that slippage is greatly reduced, resulting in better prices for swaps. With lower slippage, traders can execute trades with greater precision, resulting in more trading volume and liquidity, increasing the LPs' pool profitability.
DEX Aggregator
In 2023, SushiSwap joined the DEX aggregator business. Like many DeFi protocols today, Sushi has come up with its own aggregation router that will allow Sushi users to get some of the best prices possible for their trades on the protocol.
The Sushi DEX aggregator is vital infrastructure for Sushi's plan to become the hub of swaps in DeFi. As the aggregator brings a new wealth of asset options to users, it will attract even more users to the platform, which in turn leads to more swap fees for LPs and attracts more liquidity overall in a positive feedback loop.
How to make money on SushiSwap?
SushiSwap used to be extremely profitable in its early days, with users gaining hefty APYs for providing liquidity and SUSHI rewards on top of it. However, the downfall of SushiSwap was its inflationary token emissions. Basically, the SushiSwap protocol issued more SUSHI tokens than the liquidity it was bringing in.
The heydays of SushiSwap may have passed, but there are still profits to be made from providing liquidity. SushiSwap has a comprehensive list of supported liquidity pools, and some of them offer double-digit APYs. This is the case with newly launched tokens, where liquidity is being bootstrapped.
Here's how you provide liquidity on SushiSwap:
Open the SushiSwap app
Click on the Pools tab
Select the pool of your choice
Click on the "Deposit" button
Input the amount of tokens you wish to provide as liquidity
Click "Deposit"
Approve transaction
Profit
On the same interface, users can deploy capital for a specific price range, and earn LP fees in that range. The benefit of using concentrated liquidity is that LPs can earn more fees compared to a regular LP position. Using concentrated liquidity requires more time to monitor the position. If the price falls out of range, users stop earning LP fees.
Price Prediction for SUSHI: Can it hit $1000?
Buying and hodling SUSHI — the native token of SushiSwap — is one way of potentially making money on Sushi.
By looking at its current price, it’s natural to think about the chance of SUSHI hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever-changing factors.
Let’s examine the potential growth of the SUSHI token by analyzing its tokenomics. SUSHI’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} SUSHI tokens being in circulation today, that means a price of {PRICE} per SUSHI.
How did we come to that calculation? It’s quite easy, the price of a SUSHI token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each SUSHI coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of SUSHI at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for SUSHI to hit that price.
At a price of $1000 per token, that means the current market cap of SUSHI would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. SUSHI’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} SUSHI which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of SUSHI? Taking into account the current price of a SUSHI token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. SUSHI coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a SUSHI token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the SUSHI protocol fully diluted market cap.
These are all crucial details to know when calculating if SUSHI can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of SUSHI depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some SUSHI to your portfolio, the most trusted places to get some are Binance and Coinbase.