Why New DeFi Project SushiSwap Can Steal Uniswap Volumes
Decentralized finance (DeFi) project SushiSwap racked up over $30 million in liquidity over this weekend and spurred discussion in the broader crypto community on how it could topple Uniswap’s market-leading position as a DEX.
SushiSwap is a fork – or a radical change to the protocol of a blockchain network that makes previously invalid blocks/transactions valid (or vice-versa) – of Uniswap, the decentralized exchange that functions as an automated market maker and provides rewards to liquidity providers in the form of LP tokens.
But SushiSwap takes the Uniswap thesis a step ahead. It allows SUSHI holders to punt their newly gained (from staking) tokens and lend them out to the SushiSwap protocol for additional yields while also functioning as a governance token. The latter allows holders to propose and vote on future implementations and changes to any dApp.
And holders are lapping it up. Sushiswap vaults – with funny names like Band-osaurus, Todie Marine, and Ample Chicks – have attracted hundreds of millions of dollars worth of Ethereum and other tokens like Chainlink and Compound.
It’s all for the lure of impressive yields. Pools on Sushiswap offer yields of as much as 1,000% in the form of the native SUSHI tokens, which can be sold on the open market to buyers interested in buying SUSHI for staking or trading.
This has seemingly created massive public demand. The bourse is now worth over $30 million by market cap in the open marketplace, based on figures by Coingecko.
Uniswap the Next Target
The next step is to compete with Uniswap directly. SushiSwap is now offering a bonus yield – in SUSHI – to stakers using its platform to migrate the SUSHI-USD Uniswap LP tokens, per its site, “For the first 100000 blocks (~2 weeks), the amount of SUSHI tokens produced will be 10x, resulting in 1000 SUSHI tokens being minted per block.”
“This is to incentivize early farmers and adopters of the protocol and to help in The Liquidity Migration.”
SUSHI is the latest in a series of food-based meme coins. In the past month alone, tokens like Tendies, YAM, COW, and others made the rounds in the crypto market. But that was not all – these projects even boasted millions of dollars in trading volume during their short tenure.
Meanwhile, the Sushiswap contracts are yet to audited, meaning it is still a very risky investment that suffers from both technical risk and yield risk (which happens if Ethereum other tokens were to rapidly lose value).