First of all, thank you for reading this article. I would like to introduce you to one of the most exciting crypto platform, also considered as a DeFi blue chip, Sushi! None of this is financial advice - Please do you own research.
I. Introduction
What is Sushi?
Sushi is a community-driven Decentralized Finance (DeFI) platform. Not only it enables users to swap tokens, but also proposes unique innovations that differentiate Sushi from the competition: Kashi lending & borrowing, BentoBox apps, Sushi Bar staking for yield & voting rights and Onsen liquidity pools.
The Sushi Team & Community
One the biggest strength of Sushi is the team & community, under the leadership of @0xMaki. In addition, Sushi is working extremely hard at being a pioneer in the overall crypto ecosystem through involvement in blockchains other than Ethereum (Polygon, Fantom, BSC, Avalanche, etc.) and integration with 20+ wallets used by more than 150,000 Sushi holders.
Furthermore, close collaborations with major protocols such as Aave and Yearn contribute significantly to the added value provided to users so that they can create multi-protocol strategies to optimise yield generation.
Sushi wouldn’t be what it is today without its talented team of anons and non-anons. Interesting interviews can be found on Sushi’s medium account, which helps get a grasp of the mindset the team operates in. One thing to note is that @Arthur_0x’s Defiance Capital is an investor in Sushi so we can imagine that proper due diligence has been done prior to the investment. There are also plenty of @0xMaki’s interviews on YouTube shall you need deeper operational insights.
II. The Product
Swap
Swap is an AMM (Automated Market Maker: fancy word for a decentralized exchange using multiple liquidity pools of two tokens to swap them for each other).
In this example, swapping 1 ETH would give you 7.257 AAVE. The AMM displays the equivalent in USDC along with the price impact for the transaction. A low price impact essentially means that the pair is highly liquid whereas low-liquidity pairs may require you to modify slippage tolerance in the settings.
The second tab called “Liquidity” lets you add a pair of tokens in a given liquidity pool to become a liquidity provider. There are a number of benefits to adding liquidity such as accruing 0.25% of the trading fees generated by the pool in accordance with your shareholding of the latter. Indeed, once you deposit a pair of assets in a pool, you will be given SLP tokens (Sushi Liquidity Providers tokens) representing your share. You can then stake those SLP tokens to get additional SUSHI rewards!
Yield
On the main menu, you can get access to yield instruments, namely via lending single tokens (Kashi) or staking SLP tokens. A search function for specific tokens is made available so that you can look for tokens you may own and see if a yield instrument is available for them. If you are participating in a given instrument, it will be displayed on top of the other ones for easier management.
As an example, I have provided both YFI and WETH in equivalent initial dollar value in the YFI-WETH pool, and can now claim 4.99 SUSHI as rewards. It’s also possible to add or remove liquidity with the latter requiring you to withdraw/unstake your SLP tokens first.
The Sushi Bar
The Sushi Bar’s primary objective is to help you stake your SUSHI tokens at a variable return that tend to range between 5 and 30% (average of 6.31%), depending on how much USD value is staked in the overall protocol.
The great thing about staking SUSHI is getting xSUSHI, which can be used for voting rights but also as collateral in other protocols such as AAVE.
For instance, if you hold BTC and ETH and would like to make these assets work for you, you could deposit them as collateral in AAVE and borrow a stablecoin (at a value of ~0.5x your collateral), swap it for SUSHI, stake SUSHI for xSUSHI and deposit xSUSHI as collateral in AAVE, to borrow even more stablecoins. This is an excellent low leverage strategy allowing you to have exposure to two or more assets at the same time!
In that order, in the SUSHI vesting tab, you will find a button to stack yields with SAAVE (SUSHI → xSUSHI → aXSUSHI on AAVE) to perform the actions explained above in one transaction. This kind of cross-functionality/protocol integrations is a great example of the team’s ability to deliver way past the finish line.
Just make sure your AAVE health factor remains relatively high in case of major market drawdowns.
Lending & Borrowing [Kashi]
Kashi serves as the lending and borrowing function of Sushi. By depositing funds in markets through your wallet or BentoBox (Sushi’s internal vault to store tokens in order to interact with dApps such as Kashi), you can earn yields. As an example, lending DAI will get you a 33.24% APR, which is quite significant for a stablecoin while other users would borrow DAI by depositing ETH as collateral. For more information, you can check out @AyokiRoll’s article about Kashi here.
The borrowing function is inherently useful to:
Get involved in yield farming;
Set up trading positions such as a leverage short for certain assets that were not available for shorting through AMMs before; Or building a long position via stablecoin borrowing.
It’s important to understand that, in opposition to AAVE or COMPOUND, the pools are isolated from each other, which reduces the protocol risk if one of the assets goes to zero.
Vesting
Vesting enables you to claim SUSHI rewards generated by yield farming. Every week, an amount equal to 2/3 of the SUSHI rewards generated 6 months prior is available for claiming. There are a couple of things you can do with your newly claimed SUSHI:
Stake for yield as mentioned in the Sushi Bar section, and get xSUSHI;
Stack Yields with SAAVE as mentioned in the Sushi Bar section;
Deposit SUSHI into BentoBox for automatic yield on flash loans strategies [Coming Soon].
Networks
The future of Sushi relies on its integration with multiple blockchain networks. Achieving that not only expand the user base but allows the protocol to draw liquidity from each network, which in turn increase both retail and potential institutional user adoption.
At date of writing, Sushi’s launch on Polygon already attracted USD 493 M in liquidity along with USD 93 M in volume on May 13th 2021. The pools with the highest yields can provide close to a 100% APY distributed in SUSHI and MATIC rewards, with the main added value being able to farm by-way-of paying negligible fees. I will soon write a tutorial on how you can get tokens on Polygon through the MATIC Bridge.
III. The Present & Future of Sushi
The Platform Analytics
As of today, SUSHI is valued at USD 2.9 Bn with a Total Value Locked (TVL) at USD 4.4 Bn and a Fully Diluted Valuation at USD 4.3 Bn.
The highest trading volume happened on on Feb. 23rd 2021 with USD 1.2 Bn traded. Between end February and end April, trade volume decreased but has been significantly accelerating from May onwards to reach USD 1.2 Bn again on May 12th.
The first part of the year has seen a lot of new developments that are now catalysts of Sushi’s recent gain in momentum, especially with the recent integration of Polygon over a period where Ethereum gas fees are out of control.
On the Analytics page, you’ll be able to look for high-rewards liquidity pools and historical & current APY available for staking SUSHI. Moreover, new pools & pairs added recently as well as top gainers & losers per liquidity, volume or fees gained, are trackable through the left-side menu.
The Portfolio section lets you input your wallet address to monitor active pools and Sushi Bar activities.
The Technical Analysis
As for the TA, SUSHI’s price is currently sitting at $17.8 after a downtrend of 42 days that saw a price correction of -57.33% from top to bottom, followed by a reversal and a nice reaction from a 3D demand zone. Seeing consecutive breaks of market structure and a reclaim of such a key level on increasing volume ($14.0-14.9) is for me a clear bullish signal. While I don’t have a defined target in mind, reaching UNI’s current market cap in the future doesn’t sound too much of a reach.
FYI, Sushi’s current Ethereum trading volume is about 20-25% less than Uniswap while being valued 6.9x lower. Other metrics such as Market Cap / TVL Ratio may provide a rough idea of how SUSHI is currently being valued (SUSHI: 0.66 / UNI: 2.57).
It also seems that the two competitors are growing in different areas of the DeFi realm and I don’t see this market, at least in the short to medium-term, as a winner-takes-all (e.g. Binance and FTX).
The Future of Sushi
Just two days ago, the team released an article about Miso here along with an explanatory video by @0xChu. Miso is a launchpad for creation and crowd sale of new tokens while allowing creators to set up liquidity pools and provide farming rewards to users.
Following Yearn’s Woofy, it also looks like that NyanSushi, a meme token, will be available soon via depositing xSUSHI into the BentoBox.
oSUSHI, a similar token to the veCRV token was recently submitted as a proposal on May 7th here.
Last but not least, Sushi Simps is now the community-approved name of the community members :)
IV. Conclusion
Sushi is one of the most exciting DeFi protocol mainly due to the incredible development work performed by a five-star world-class team that proved its ability to innovate and push the ecosystem forward. Thinking inside & outside the (bento)box seems to be the team’s strong suit, which is illustrated by the creation of intra-protocol apps & functionalities such as Kashi and Miso as well as integrations with other DeFi protocols (Aave) and blockchain networks (Polygon). The technical analysis and the tokenomics also poses the framework for a very bullish future for Sushi.
For more content & information please reach out to me on Twitter: @0xNemissa.
Great article! Thank you so much! I consider myself as a beginner in crypto and I’m grateful for such easy to understand explanations!