Behind every new cryptocurrency these days, there’s typically an old one. One classic example is when Bitcoin Cash split off from Bitcoin. In the volatile and dynamic world of DeFi (decentralized finance), consider SushiSwap forking from Uniswap, one of the biggest and most valuable decentralized cryptocurrency exchanges.
SushiSwap is one of the fastest growing types of cryptocurrency. Here, we’ll explore what it is, how it works, and whether it’s a good crypto investment.
What is SushiSwap (SUSHI) Cryptocurrency?
SushiSwap, a decentralized cryptocurrency exchange, is run on smart contracts. Individuals can trade cryptocurrency with each other using the Ethereum blockchain. The Sushi coin is a token that allows its holders to make decisions about how SushiSwap is run.
This is different from how more mainstream, centralized cryptocurrency exchanges operate. How those cryptocurrency exchanges work is not that different from a traditional brokerage: you set up an account, load it up with money, and buy an asset — with the exchange taking either a fee or the “spread” between how much the asset is selling for and how much people are willing to pay for it (or sometimes both).
Decentralized exchanges like SushiSwap try to live up to cryptocurrency’s anarchic ethos by building a framework for people to exchange cryptocurrency with each other. One way this happens is by “liquidity mining”, where users contribute cryptocurrency they own to “pools” (pairs of crypto that can be traded on the exchange) in return for fees from the platform or, in this case, Sushi. Conceptually, this is similar to Bitcoin mining, but it typically happens on Ethereum-based blockchains and in some ways is also analogous to how banking works.
Recommended: What is a Decentralized Exchange (DEX)?
SushiSwap incentivizes users to provide liquidity for certain token pairs so that they’re available to traders on the platforms by adjusting how much they get paid out in fees. The pairs are usually Ether and another token.
Governance is another defining feature of Sushi crypto. The Sushi token enables its holders to vote on platform policy and technological choices.
How Does the SUSHI Token Work?
The Sushi token works as an incentive for staking SushiSwap with cryptocurrency pairs that can then be exchanged by its users. By staking your crypto, you get paid out in Sushi as well as fees from the exchange itself. You can also buy and sell Sushi itself.
Despite only being around for less than two years, Sushi has taken a wild ride in terms of price. As of September 30, 2021, it was the 76th most valuable token on CoinMarketCap and was trading at nearly $11. It had been priced as low as 49 cents late 2020 and as high as $23 in March of this year. The token has a market cap of $1.4 billion.
Because SushiSwap underlies a whole ecosystem of tokens, there are other relevant statistics besides the price of the Sushi token. One should also look at the whole sushi exchange universe, including SushiSwap. There’s about $4.3 billion of “total value locked” on SushiSwap, representing the value of assets staked on the platform.
History of SushiSwap
SushiSwap grew out of the most prominent DeFi exchange, Uniswap, in 2020. The Uniswap developer, “Chef Nomi,” explicitly designed SushiSwap to reward Uniswap users who migrated to the fork.
But controversy soon followed. Nomi admitted to and apologized for extracting $14 million worth of Ether from the platform before returning it to the crypto wallet used for the platform. This led to a major crash in the price of the Sushi token that it didn’t recover from until earlier this year.
Since then, the governance of SushiSwap has been overhauled and it has more than made back the losses it earned from its early developer errors.
What Can You Use SUSHI For?
The primary use for Sushi is on SushiSwap, as a reward for staking crypto to make its decentralized exchange function. Additionally, owning Sushi allows holders the right to vote on decisions regarding how the exchange functions.
As with any cryptocurrency or token, when people decide to invest in SUSHI it’s because they hope it will go up in value. Of course, given how volatile cryptocurrencies are, it’s impossible to predict the price of SUSHI or any other coin. This is part of the basics of investing in crypto. Before buying, selling, or trading crypto, investors should become familiar with crypto rules and regulations. For example, Sushi can’t be bought in every U.S. State.
Is SUSHI Crypto a Good Investment?
Interest in DeFi platforms and associated tokens is growing. There are two main reasons for this:
1. People want to trade tokens with each other in a way that doesn’t involve direct use of centralized exchanges and fiat currency.
2. They see the associated tokens as good investments.
On the other hand, this increased interest means there is fierce competition between platforms for staking, liquidity, and token investment. SushiSwap is perhaps the best example of the risks of investing in a given DeFi platform — it was itself a clone that explicitly tried to suck away liquidity from an earlier platform and was rocked by an early scandal with one of its lead developers.
In the wild west of DeFi, software products can spring up very quickly. And because the field is so new, there’s little brand or institutional loyalty among customers, users, and other stakeholders.
Recommended: Beginner’s Guide to Decentralized Finance (DeFi)
How and Where to Buy SUSHI Cryptocurrency
There are two ways to acquire Sushi.
The first is through an exchange that lets you buy cryptocurrencies with U.S. dollars or other fiat currencies. You fill an account with dollars and buy the corresponding crypto. Some exchanges that allow you to buy Sushi are Kraken and Coinbase. Some exchanges also let you trade mainstream, establish cryptocurrencies like Bitcoin for coins like Sushi.
SushiSwap is a decentralized cryptocurrency exchange run on the Ethereum blockchain. It encourages staking by incentivizing users with Sushi tokens. And in turn, Sushi tokens offer governance to holders, so they can vote on platform policy and technology.
Before investing in any cryptocurrency, it can be helpful to read a cryptocurrency guide. The world of crypto is dynamic and can sometimes be counter-intuitive. Doing your own research is always worthwhile.
Photo credit: iStock/Михаил Руденко
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