The rise of decentralized finance (DeFi) in 2020 brought many projects named after food, such as Kimchi, Spaghetti and Yam. SushiSwap–a decentralized exchange, is one among those projects that continue to grow in volume and introduce new opportunities.
Decentralized exchanges try to get rid of the middleman in transactions. SushiSwap is a decentralized exchange that worked this out using two tools—Automated Market Making (AMM) and liquidity pools. Their native token, SUSHI, is used to incentivize the users of SushiSwap.
Automated Market Making is where a mathematical formula is used to calculate the price of an asset, unlike traditional markets where buyers and sellers quote a price. AMM is applied on the liquidity pools of SushiSwap. Liquidity pools collect and hold the various crypto tokens deposited by SushiSwap users. Traders buy and sell tokens from these pools, similar to the way they do on an exchange. Those who deposit their tokens into the pools are rewarded by receiving a portion of the trading fees as well as SUSHI tokens. This is similar to the way that bitcoin miners are rewarded in both trading fees and newly-minted bitcoins.
What can you do with SUSHI?
SushiSwap is a community-led decentralized exchange. Any changes on the platform are decided by the community using a voting system. SUSHI tokens are used as the governance token for SushiSwap. Users can also stake SUSHI on SushiSwap on one of their yield farms—Sushibar, and earn xSUSHI.
Each SUSHI held in a liquidity pool gives the holder to vote on the proposals with SUSHIPOWAH. One SUSHI equals 2 SUSHIPOWAH and one xSUSHI gives the owner 1 SUSHIPOWAH to vote on the proposals. For a proposal to pass, it must receive at least 5 million SUSHIPOWAH votes.
SUSHI tokens are one of the top ten DeFi tokens by marketcaptilization. It has a hard cap of $250 million which is expected to reach in November 2030. It currently mints 40 tokens per block. SUSHI saw an all-time high of $23 in March 2021 from the all-time low of $0.05 in November 2020.
SushiSwap continues to grow as a community-driven platform for innovation in the DeFi space with AMM, yield farming and adding more DeFi lending products to its decentralized platform.