SushiSwap exploded on the promise of outsized rewards for those who entered before the automated market maker (AMM) actually started making markets – 1,000 SUSHI tokens per block for liquidity providers (LPs) who committed before it went live .
It was a good enough deal to attract nearly $ 1.6 billion worth of various crypto assets, but now those heady days of outsized rewards are over. As planned, each block reward has dropped to 100 SUSHI as of 23:10 UTC or Ethereum block 10850000.
Now that SushiSwap offers less SUSHI, no one knows what will happen to the piles of cryptocurrency locked up in SushiSwap̵
SushiSwap successfully migrated over $ 800 million in crypto assets from rival automated market maker (AMM) Uniswap on September 9, using Uniswap tokens entrusted to the upstart project by users seeking those SUSHI block rewards.
Read more: SushiSwap will withdraw up to $ 830 million from Uniswap today: why it matters to DeFi
Cash in SushiSwap currently stands at $ 1.46 billion in crypto assets, according to SushiSwap Vision, the block explorer created by the site’s community. Uniswap meanwhile has $ 539 million, according to DeFi Pulse.
SUSHI is currently trading at $ 2.45 at the end of the bonuses, below the seven-day high of $ 3.17, according to CoinGecko.
All about surrender
Cryptocurrency dwellers want to change the world, sure, but what they really want is money.
Giving away a new token has become an obvious way for new protocols to compete with market leaders. Liquidity mining is a category of yield farming where liquidity providers (LPs) earn an additional token in addition to any commission earned by the underlying protocol. Growth hacking was introduced by the DeFi Compound lending platform in June, with its COMP governance token kicking off cascading innovations in the following months.
In this case, both Uniswap and SushiSwap cling to 0.3% of each transaction in their pool, expressed in whatever token they are in the pool. But SushiSwap also distributes a fixed amount of freshly minted SUSHI to its LPs each block. (Uniswap has yet to offer such a scheme, but it is widely expected among DeFi insiders.)
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Prior to block 10850000, each SushiSwap LP received SUSHI in proportion to the liquidity provided.
So, if SushiSwap only had 100 LPs and everyone put in the same amount of cash, each would get 10 SUSHI per block. If that number went up to 1,000 LP for the same amount, they would only get 1 SUSHI each.
More LPs reduce the yield on a mined token, but it likely also increases the token’s value. What is the optimal balance? It’s hard to say.
With SUSHI distribution now plummeting to 100 per block, this will be the question on every SushiSwapper’s mind.
Will liquidity come out of SushiSwap or will it actually arrive? A discussion could be advanced in both cases.
The SushiSwap community wants to refine the block rewards further, but they have been hampered so far.
The pseudonymous (and controversial) creator of the project, Chef Nomi, apparently had a view that SushiSwap’s tokenomics would remain relatively fixed and that the main governance issue for the community would be how quickly to add new pools.
The SUSHI community appears to want detailed scrutiny, however, and that could bode badly for the low governance models currently in the works.
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SushiSwap’s new leadership – a council of nine people elected by the community on September 9 – posted a new blog post on Saturday about the project’s inauguration and its immediate schedule.
The post, in less than perfect English, states:
“Being a fork where we’re just copying the recipe isn’t enough to be successful and moving forward everyone knows. We won’t become the best DEX without compelling new features and tools for our LP – Traders and Sushi holders.”