7 things to know before buying SushiSwap (SUSHI)

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Launched in August 2020, SushiSwap (SUSHI) is both a cryptocurrency token and a decentralized exchange. The exchange offers a platform for anyone to trade cryptocurrency – hence the word “swap” in the second half of its name. As for the first half, the creator probably likes sushi.

Even though SushiSwap aims for a fun environment, it’s no joke. The exchange has over $ 3 billion in cash at the time of writing, and the price of the cryptocurrency has risen more than 1,500% since November, according to data from CoinMarketCap. If you are thinking of becoming one of what SushiSwap calls their “sushi chefs,” here is what you need to know first.

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1. SushiSwap is an automated market maker based on the code of Uniswap

SushiSwap is a type of decentralized exchange called an Automated Market Maker (AMM). It allows users to exchange cryptocurrency tokens, but no central authority manages the transactions. Instead, SushiSwap automatically sets prices with mathematical formulas and processes transactions using smart contracts.

Where do all these cryptocurrency funds come from? For this, SushiSwap has liquidity pools, or large pools of funds. Its users lend their own crypto to these cash pools in exchange for rewards.

SushiSwap is not the first AMM. It is based on another: Uniswap (UNI). An anonymous developer under the pseudonym Chef Nomi coined the code for Uniswap, which means they used that code to create SushiSwap.

2. It all started with a “vampire attack”

The problem SushiSwap encountered at launch was bringing in users who would provide cash by lending their crypto. People could do this with Uniswap already, so it would take an incentive to get them to switch to a new exchange.

Chef Nomi provided this incentive through SushiSwap tokens. Users can receive them by making deposits on SushiSwap. And Chef Nomi has devised a tactic to help SushiSwap gain the advantage over his rival. Users should deposit Uniswap tokens to earn rewards on SushiSwap. Thanks to SushiSwap’s rewards, those who passed would earn more than they could on Uniswap.

This was called a “vampire attack” because it led to draining cash from Uniswap and adding it to SushiSwap. In the end, SushiSwap made around $ 810 million in crypto funds. But the event garnered so much attention that both exchanges ended up attracting a lot more users.

3. The original developer made a carpet draw, but then returned the funds

SushiSwap has not been without controversy. Early on, Chief Nomi committed a common scam known as carpet pulling. This is when a developer takes funds from investors for a project.

Chef Nomi took over 2.5 million SushiSwap and 20,000 Ethereum tokens on September 5, 2020, just one week after the exchange launched. At the time, the crypto taken was worth around $ 14 million.

Many in the SushiSwap community were upset, but that wasn’t the end. Sam Bankman-Fried, CEO of crypto exchange FTX and an early investor in SushiSwap, offered to take over the project and donate 5 million SushiSwap tokens.

A new team was formed to lead the project. Chief Nomi also apologized to the community and returned all the crypto he had taken.

4. Users can trade cryptocurrencies, borrow, and earn rewards

There are several things you can do on SushiSwap:

Swap: Exchange one cryptocurrency for another, for example by converting your USD coin (USDC) into Ethereum (ETH). Farm: Deposit the crypto into one of SushiSwap’s cash pools to earn rewards. Cash pools contain combinations of two or more cryptocurrencies, and you must deposit an equal amount of each. Stake: Deposit your SushiSwap tokens to earn rewards. Loan: Provide the crypto so that others can borrow it and earn interest on it. Borrow: Borrow crypto after providing collateral. 5. You don’t need an account to use SushiSwap

If you are used to centralized cryptocurrency exchanges, the SushiSwap experience is very different. You do not create an account and do not go through an identity verification process.

All you need to use SushiSwap is a crypto wallet. On the SushiSwap app, you connect your wallet and then you can use it to trade, lend or borrow cryptos.

It’s much faster than starting with a centralized exchange, but you must already have some cryptocurrency funds. You cannot buy crypto on SushiSwap through your bank account or debit card. Most users do this on a centralized exchange first. After that, they move the funds to a crypto wallet and connect it to SushiSwap.

6. SushiSwap cryptocurrency is a governance token

As a governance token, SushiSwap gives holders the right to vote on the future of the stock exchange. If you buy SushiSwap, you can vote on the proposals and help determine what is going on with it.

That’s not the only reason to hold SushiSwap, however. You can also bet your tokens on the SushiSwap app. If you do, you will receive a share of the swap fees on the exchange. Since this is an easy way to earn more crypto, this is something all SushiSwap holders should be doing.

Finally, if the SushiSwap exchange continues to gain popularity, the price of its cryptocurrency could rise with it.

7. It’s in a competitive market

SushiSwap is an exciting project, but it’s important to keep in mind that it’s far from the only decentralized exchange making waves. Its inspiration, Uniswap, still generally has a much larger daily trading activity.

Many other decentralized exchanges have been launched over the past year, with PancakeSwap being another that has garnered considerable attention. It remains to be seen how many of these decentralized exchanges will be successful in the long run.

If you want to buy SushiSwap, it is available on several crypto exchanges. Also, be sure to check out some of its competition if you are interested in Decentralized Finance (DeFi) apps. And remember that like all cryptos, SushiSwap is risky, so you shouldn’t be spending more than you could afford to lose.

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