Before jumping on to the Sushiswap protocol lets first discuss – Uniswap. Uniswap has been the most successful decentralized finance (DeFi) protocol for swapping tokens on the Ethereum. In short, it is a decentralized exchange (DEX) but offers more benefits than traditional DEX.
Token swapping is a way of transferring cryptocurrency to another blockchain at a pre-defined rate. Token swap usually occurs when any crypto-project launches its own blockchain and wishes to move the tokens from another blockchain to its new network.
Traders can exchange Uniswap tokens on Ethereum without any need to trust anyone with their funds i.e. everything is decentralized. Meanwhile, anyone can lend their cryptocurrencies to special reserves called liquidity pools and earn rewards.
What is Uniswap?
Uniswap protocol was developed by a set of passionate programmers, who made the code open-source and made it available for anyone to fork. And this is exactly what Sushiswap did.
Sushiswap is a new player in the field that promised to change the previous, and today it has over $1 billion worth of value locked into the protocol. It has been observed that after a few days of launch, many are interested in this change.
What is Sushiswap?
On one side where the Uniswap is a decentralized exchange protocol that works without an order book, Sushiswap is the fork of Uniswap, with some key differences. The first being the Sushi token. The sushi token has two functions when launched:
- Entitling holders to governance
- A portion of the fees paid to the protocol
Now, the reason behind it has spurred so much of interest among the community is because the playing field for everyone has no premises, little or no founder allocation, and equal distribution based on the number of funds applied.
Also, the SUSHI holders are entitled to a portion of fees paid into the protocol by traders.
One interesting thing is that community governance is heavily intertwined with eThos. But, what can token holders do with these governance rights?
Well! Anyone can submit the SushiSwap improvement proposal (SIP), in which the Sushi token holders can vote with their tokens. The changes can be minor as well as major. Unlike the Uniswap which follows the traditional way, the changes in Sushiswap are in the hands of SUSHI token holders.
Is Sushi Safe?
SUSHI was an unaudited project as of September 1, 2020. Depositing funds into a smart contract had always involved risks irrespective of the project’s reputation. However, the Sushiswap is made by the anonymous, which increases the risk even further.
You can take Sushi as a fun experiment. It is best if you invest only the amount which won’t hurt much in case of loss.