Sushiswap - the appetizing fork of Uniswap
In one of our previous blogs, we learnt how Yield Farming allows traders to lend their cryptocurrencies to liquidity pools and earn interest. Taking forward this concept, several protocols like Uniswap were launched in the DeFi market to facilitate token swaps. Uniswap on Ethereum was the pioneer of eliminating the challenge of continual liquidity in the market by introducing automated liquidity pools. Growing liquidity ensured the easy process of swapping tokens.
Another popular protocol called the SushiSwap is doing the rounds of the DeFi marketplace of late. So, what is this SushiSwap protocol? SushiSwap can actually be looked at like the child of Uniswap. While its background is pretty similar, SushiSwap is designed to provide new benefits to the participating investors. Let us see how.
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1) SushiSwap is the improvised and more user-friendly fork of Uniswap. Unlike Uniswap that follows Automated Market Makers (AMM), SushiSwap is a user-oriented platform where users provide liquidity in lieu of rewards.
2) Similar to Blockchain, SushiSwap is founded by an anonymous group which goes by the name Chef Nomi.
3) SushiSwap has its roots in Uniswap but promises to be more investor-friendly, more secure and more efficient than its parent protocol.
4) It allows investors to lend their crypto to liquidity pools and earn tokens and fees as rewards. Additionally, these investors continue to receive rewards even if they stop investing in the liquidity pool, which is its biggest advantage.
5) SushiSwap garnered immense popularity immediately after it was launched as it locked $250 million within 24 hrs of its launch.
To begin with the functioning of SushiSwap, a distribution system to transfer Uniswap liquidity providers onto SushiSwap was designed. Investors interested in lending and becoming a liquidity provider on SushiSwap had to stake their Uniswap tokens to start.
The SushiSwap protocol is designed in such a way that out of all the transaction fees generated from the network, 0.3% is reserved to be distributed amongst liquidity providers, as rewards or fees. Out of this, while 0.25% is distributed to the liquidity providers, the remaining 0.05% is converted back to SUSHI tokens and distributed to the token holders. SushiSwap respects all the old and new liquidity providers, hence continues to pay investors who have stopped investing in the pool. SUSHI tokens are rewarded to the token holders in the system for their efforts of mining.
SUSHI can be traded on prominent DeFi exchanges such as Binance, FTX and OKEx.
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As it is a public blockchain, anyone can join the network without requiring any sort of permission. Any investor can contribute to the liquidity pool and earn benefits. As mentioned above, SushiSwap not only pays the liquidity providers who contribute to the pool, but also continues to pay stakeholders who have stopped investing but were part of the platform before. SushiSwap also retains around 10% of its token distribution system to perform regular security audits of the platform.
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