Cryptokoin.com – In the two years since its launch, Uniswap has solidified its position as one of DeFi’s mainstays. However, protocol designs have become a standard in their own right, and many projects have begun to derive their mechanics.
That said, SushiSwap’s founders say the protocol was designed as the next step in Uniswap protocol design: evolution. In the Medium article published by the platform, it is stated that by taking Uniswap’s elegant basic design, it adds community features that are believed to bring more benefits to the actors involved, as well as helping to improve the design of the protocol.
Protocol design
Incentives for liquidity providers
Of course, one of the questions many may have is: “Why would anyone want to provide liquidity to SushiSwap instead of Uniswap?”
With Uniswap, liquidity providers earn the pool’s transaction fees only when they actively provide that liquidity. When they withdraw their share of the pool, they no longer have access to that passive income. Moreover, as the protocol gains traction, those who join early as liquidity providers risk their residual returns being diluted. Because larger and wealthier stakeholders are more likely to join the protocol with large amounts of capital.
With SushiSwap, you can provide some liquidity to a pool and earn rewards in the form of SUSHI tokens. Also, unlike Uniswap, you have the right to continue to earn a portion of the accumulated protocol fee as SUSHI even if you decide not to participate in liquidity anymore. As a pre-liquidity provider, you become an important stakeholder of the protocol.
Your earnings through staking will be proportional to the total amount of LP tokens staked versus the total amount of LP tokens staked. Unless you continue to provide liquidity, your assets and the rewards you earn will gradually decrease.
Token distribution
SushiSwap says they are aware that the majority are liquidity providers in their Uniswap pools. However, he mentions that they have designed token distribution mechanics to make it as easy as possible for existing Uniswap liquidity providers to start migrating to their protocol.
To start providing liquidity and earning SUSHI tokens, anyone holding Uniswap LP tokens can put those LP tokens into the first corresponding pool. Once this happens, rewards will begin to be earned at block 0750000. The community will decide together the list of eligible LP tokens.
100 SUSHI tokens will be generated in each block. These tokens will be distributed equally to the shareholders in each of the supported pools.
However, for the first 100,000 blocks (approximately 2 weeks), the amount of SUSHI token produced will be 10 times the normal amount and 1000 SUSHI tokens will be minted per block. This is an event to encourage “yield farmers” and protocol adopters and assist “The Liquidity Migration”.
First available pools:
- CeFi Stablecoins (central finance stablecoins): USDT-ETH, USDC-ETH
- DeFi Stablecoins (decentralized finance stablecoins): DAI-ETH, sUSD-ETH
- Lending Protocols: COMP-ETH, LEND-ETH
- Synthetic Assets: SNX-ETH, UMA-ETH
- Oracles: LINK-ETH, BAND-ETH
- Ponzinomics: AMPL-ETH, YFI-ETH
- Delicacy (2x reward): SUSHI-ETH
The SUSHI/WETH pool takes twice the amount, so you can get extra rewards if you supply your SUSHI from Uniswap. Once SUSHI is available, the community can vote to add more eligible pools or change the amount of SUSHI in any pool.
Award distribution
With the current Uniswap configuration, 0.3% of all transaction fees in any pool are prorated to the pool’s liquidity providers. In SushiSwap, 0.25% goes directly to active liquidity providers, the remaining 0.05% is converted to SUSHI and distributed to SUSHI token holders.
Sustainability of the project
How is the long-term sustainability of the project ensured? At the suggestion of “@LawMaster”, the team; 10% of every SUSHI distribution is set aside for development and future innovation, including security auditing.
The Liquidity Migration
After the first 100,000 blocks from the start of the protocol (approximately 2 weeks), all liquidity tokens deposited into SushiSwap contracts will be migrated. This transition means receiving all Uniswap LP tokens staked on SushiSwap; It will include the use of Uniswap for the respective token pairs and the process of initiating new liquidity pools from these tokens. These new pools will be nearly identical except for the SUSHI token feature.
Once the migration is complete, the converted liquidity will feed the initial sets of SushiSwap pools and put the protocol into operation immediately. Stakeholders will not need to do anything other than provide liquidity and receive SUSHI rewards in this case.
Protocol usage
At the protocol and smart contract level, SushiSwap shares the same interface as Uniswap. This means that if your protocol is currently Uniswap compatible, it’s also relatively simple to integrate with SushiSwap. The team states that they will be working with various DeFi and other ecosystem tools to begin integrating SushiSwap.
Security audit
The team says that security is very important to them and they have tested that everything works on the testnet. Calls Trail of Bits, PeckShield, OpenZeppelin, Consensys, Certik and Quantstamp and more to audit their contracts. According to the Medium article, the first company to confirm that they will conduct an audit on their official Twitter account will get this job.
The contracts to be audited will be the contracts in the SushiSwap smart contract pool located at https://github.com/sushiswap/sushiswap, which are already considered ready for auditing.
Smart contracts
Agreements are available under WTFPL license at https://github.com/sushiswap/sushiswap. Some code was taken from other projects including Uniswap / Yam / Compound / OpenZeppelin and is subject to their licenses. Below is a rough description of smart contracts:
- SushiToken: Token contract with COMP/YAM voting functionality.
- MasterChef: Invest LP tokens for SUSHI farm (yield farming).
- SushiMaker: Collect the proceeds and convert them to SUSHI and send them to SushiBar.
- SushiBar: Stake SUSHI to earn more SUSHI.
- Migrators: Move MasterChef LP tokens from Uniswap to SushiSwap.
- GovernorAlpha + Timelock: Governance elements in Compound.
- UniswapV2: UniswapV2 contracts with minor changes for migration.
How can you join?
You can start depositing LP tokens into the MasterChef contract using the interface at https://app.sushiswap.org.
You will start earning SUSHI after block 10750000. So make sure you deposit your LP tokens before that.
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