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A Beginner’s Guide to SushiSwap (SUSHI)

BitForex Editor
Sep 14, 2020


The Decentralized Finance clime has been increasingly growing. There has been the introduction of a lot of financial platforms into the DeFi field. Investors in this field have been able to leverage things like mining, yield farming, and flash loans to make more money using their money.  The ethics governing the decentralized finance field and dependence on smart contracts is of great advantage, but it is quite challenging for investors (users) to determine the developmental direction.

SushiSwap has just been newly introduced into the decentralized field and has come to solve this problem. This article does not explain how SushiSwap should be run but what it is and how to utilize it. SushiSwap involves yield farming. It is expected that there is a high risk surrounding this process, and whoever is willing to deal with SushiSwap should do their homework that involves research and great understanding very well.

Brief on UniSwap

It is important to note that to have a great understanding of what SushiSwap is; you need to understand UniSwap. UniSwap is a decentralized automated liquidity protocol that is built on Etherum. The trading process in UniSwap does not involve the use of an order book (an order book is a list of purchase orders for an asset that is currently opened and usually organized by price). The trading system in UniSwap does not need intermediaries, and it involves censorship resistance and high-level degrees of decentralization, and it is open-source software.

It is necessary to explain how the trades go on without an order book. It simply involves the creation of liquidity pools by liquidity providers. This model of operation provides a decentralized pricing system that defeats the essential purpose of an order book. Users of the UniSwap system can swap between ERC-20 tokens without an order book.

What is SushiSwap?

SushiSwap is similar to UniSwap, but there is a crucial difference between both systems: the SUSHI token. The SUSHI token allows its holders to have full ownership rights and entitled to traders' fees paid to the system. As stated earlier, SushiSwap utilizes yield farming in the distribution of tokens. Due to the continuous growth of yield farming methods, there has been an increase in the number of tokens launched over the years. The liquidity incentives utilized give token holders governance rights.

What is the importance of governance rights?

Anyone can submit the SushiSwap Improvement Proposal (SIP), and then users can use their governance rights to vote. What this explains is that the development direction of the SushiSwap system depends on its token holders. An example of the demonstration of the power of governance rights was when holders of the SUSHI token voted on the introduction of additional pools to be eligible for distribution.

Sushi Swap is so popular because it markets itself as an improved version of Uniswap. Sushi Swap is a Decentralised Exchange system that allows its users to provide liquidity, and then the users are rewarded based on the liquidity created. Traditional exchange systems have to integrate market markers into the system, but Sushi Swap does not have to do this because its users are the market markers.

How does SushiSwap compare to Uniswap?

Cryptocurrency is an open-source system. E-currencies like Bitcoin with permissionless decentralized finance protocols in the public have been copied and modified to produce new products. So this has increased the competition in the market, and it is up to who can create the best-modified version of permissionless DeFi protocols. Current protocols in the decentralized finance clime owe its birthing to UniSwap. In the future, all protocols are bound to do well with UniSwap acting as the innovation background for others to copy.

SUSHI Rewards

SUSHI tokens are the rewards given to users for mining and the creation of liquidity. Users with these tokens are given the privilege to be involved in the governance of the SushiSwap platform. These tokens are distributed through liquidity mining. Liquidity mining is referred to by many as yield farming. It is a way to gain more cryptocurrencies using your cryptocurrency. You will be able to generate rewards through cryptocurrency holdings (locking of cryptocurrency). Yield farming involves lending crypto through computer software called smart contracts, and then you get rewarded for offering these services. Yield farming involves strategies that involve moving crypto through different lending platforms to maximize their gains. Yield farming is done in the Etherum ecosystem using the ERC-20 tokens, and the reward is usually similar to the ERC-20 tokens.

Users that provide liquidity to Uniswap pools are given SUSHI tokens. Then these users deposit their UniSwap LP tokens into the staking contracts in the SushiSwap platforms to start earning SUSHI tokens. The UniSwap pools used for this process were BAND-ETH, DAI-ETH, LINK-ETH, COMP-ETH, SUSHI-ETH, UMA-ETH, AMPL-ETH, USDT-ETH, USDC-ETH, SNX-ETH, YFI-ETH.

Rewarding the liquidity provided for the SUSHI markets with SUSHI-ETH pool gives double rewards.

Advantages of SushiSwap

1.SushiSwap Model: 0.25% is given to the active liquidity providers, and 0.05% is converted to SUSHI tokens rewarded to holders of the token.

2.Earning of Tokens from the Provision of Liquidity: In SushiSwap, SUSHI tokens are rewarded for providing liquidity and the contribution to liquidity pools. SUSHI tokens can be exchanged for Etherum (ETH)

3.No KYC (Know Your Customer) Policy: The SushiSwap platform does not have the KYC policy, which means anyone can contribute to the liquidity pools. The system is permissionless, and that is one massive advantage for everyone because that makes the system open for everyone.

How safe is SushiSwap?

Anonymous developers created SushiSwap; it is an unaudited project, making it risky to deposit money into a smart contract. Even for audited projects with high reputations, it is risky depositing funds into a smart contract. You shouldn't deposit what you cannot afford to lose, and if you deposit smaller amounts, it takes a longer time before it yields enough profits. Developers of SushiSwap have started making plans to invite auditors to have their projects audited.

SushiSwap is a fantastic project with exciting advantages. It is similar to UniSwap but edges it with community governance, i.e., the development of the system is in its users' hands.

About BitForex:

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BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts,  derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.

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