What Is Sushi
What Is Sushi

Sushi (SUSHI) was initiated by an anonymous group called Chef Nomi, SushiSwap is a hard fork of the blockchain-based protocol Uniswap. It inherits the original design and characteristic properties from the parent company.

The project reminds users of the founding of Bitcoin, as the world’s most popular cryptocurrency was also mysteriously created by an anonymous person or a group named Satoshi Nakamoto.

What is Sushi (SUSHI) Token?

Sushi (SUSHI) is the cryptocurrency token for the decentralized finance platform, SushiSwap. It was created to power the ecosystem of automated market makers on the protocol. This includes providing trading fees and rewards for liquidity providers who are staked in a pool. Users need to have Sushi tokens to access certain features on SushiSwap, such as yield farming with staking or participating in governance decisions.

The network focuses on enabling users to exchange tokens based on Ethereum (ERC-20) using the liquidity pool. Regarding the primary goal, the protocol targets security, censorship resistance, and efficiency in the exchange of ERC-20 tokens.

SushiSwap rapidly raised $250 million from Uniswap after the launch date and revealed its native token – SUSHI.

The SushiSwap ecosystem has two phases: In the first phase, traders add a token to Uniswap’s liquidity pool and receive SUSHI in return. In the next phase, traders transfer staked tokens and use them on SushiSwap DEX.

What is the Purpose of Sushi (SUSHI)?

On Uniswap, liquidity providers earn from transaction fees generated on the system. That said, major crypto exchanges, mining pools, and other wealthy providers seemingly take loads of control and put small liquidity providers at risk of being weaker.

The unfair advantage of larger liquidity providers poses a challenge in the DeFi ecosystem, and that’s where the SUSHI token comes in. The purpose is to encourage more liquidity providers.

Instead of using ETH Token like Uniswap, rewards will be given in the form of SUSHI tokens.

Liquidity providers can earn a portion of the transaction fees even if they decide to stop participating in offering liquidity. Becoming an early SUSHI holder could put holders in a better position and open up the chance to earn more incentives.

SushiSwap is also aiming to build an elaborate reward system. The rate of transaction fees remains the same as Uniswap but differs in the distribution mechanism. On Uniswap, 0.3% is split evenly among the liquidity providers of one group.

SushiSwap returns 0.25% of the pool’s transaction fees to the users who provide the liquidity, and in this way, it is a little different.

The remaining 0.05% is converted into SUSHI and sent to token holders. In other words, you can earn SUSHI by providing liquidity for certain pools, and a part of the incentive from the liquidity pools will be shared with SUSHI holders.

Security testing support is another major highlight of SushiSwap. It’s a new project, but it seems to have found a lot of potential in the DeFi space.

How Does Sushi (SUSHI) Work?

SUSHI – the native token of the Sushiswap ecosystem – is used as a bonus for liquidity exploitation. When you participate in liquidity mining, you will be rewarded with SUSHI. Major exchanges are currently supporting SUSHI trading, such as FTX, Binance, and Gate.

The functionality of the shared fee for SUSHI miners is another use case of this native token.

With Uniswap, 0.3% of all transactions in the pool are divided among the liquidity providers. But in SushiSwap, 0.25% goes directly to the liquidation provider, while 0.05% will be transferred back to SUSHI holders.

Looking at the token use case of SUSHI, it’s easy to see that the value of SUSHI is attached to the ecosystem of Sushiswap. The larger the SushiSwap gets, the more value SUSHI increases, which means in the long run of more trading pairs, the equilibrium prices are also around a higher level.

Like many tokens that rely on a specific use case to retain value, SUSHI will require that the SushiSwap ecosystem remains in use, or even grow, to hold value. Like any token that can be traded outside of the leading platform, SUSHI can be used as a currency, especially in P2P transactions.