SushiSwap (SUSHI) – All you need to know

What is SushiSwap?

It is one of the world’s leading DEXs, having copied the open-source code of Uniswap to form in 2020. The platform was founded by Chef Nomi, along with co-founders sushiswap and 0xMaki, with the aim of creating an improved version of Uniswap. 

On the face of things, it functions in much the same way. To create the liquidity necessary for a thriving exchange, SushiSwap uses liquidity pools. Essentially, users lock their tokens into smart contracts (pieces of code on the blockchain) and they are added into separate groups of tokens in a 50/50 ratio. Traders then buy and sell tokens directly from these pools. 

A major part of the cryptocurrency narrative is decentralisation, and that is exactly what SushiSwap hones in on. It allows users to trade cryptocurrencies without the need for a central administrator, while software changes to the platform are determined by holders of the platform’s native token, SUSHI. 

SuhsiSwap’s fees are the same as Uniswap, though its offering of tokens is far more limited. Moreover, the controversy surrounding Chef Nomi’s use of the platform’s $14 million developer fund has led to increased scrutiny on SushiSwap, though this capital was later returned after a 70% SUSHI price crash. 

If you want to get involved in the SushiSwap ecosystem, or if you simply want to speculate on the future success of the platform, check out our guide that explains how to buy SUSHI tokens. 

How does SushiSwap work?

The liquidity pools allow the SushiSwap exchange to function. These a pools of cryptocurrencies that a user can trade with, removing the need for them to be matched with a specific seller and ensuring that each market has enough liquidity. To create the pools, the platform offers a reward to the people who store their assets on SushiSwap.

The reward is paid out of a 0.25% transaction fee that is applied by SushiSwap to all trades that use pools. Providers receive a number of tokens based on their level of contribution to the particular pool. 

Interestingly, SushiSwap’s flat transaction fee is slightly higher, standing at 0.30%. The 0.05% that isn’t paid to liquidity providers is converted to SUSHI tokens and paid to holders of SUSHI tokens. SUSHI can be purchased on the open market or earned through mining, similar to Bitcoin hardware mining. Holders of SUSHI can also speculate on price fluctuations and long-term growth and also have voting rights on development decisions. 

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