Analysis of SushiSwap operating model – Multi-product model

• Some information to know about Sushi
• Operation model of SushiSwap
• So does SushiSwap's operating model work?
• Epilogue

Some information to know about Sushi

What is sushi?

According to the development team, Sushi is a community-based organization that was established to solve the liquidity problem in the decentralized financial market. Sushi combines multiple markets and tools into a single product system. So far, Sushi has launched a wide range of products ranging from a decentralized exchange (SushiSwap), a decentralized lending market (Kashi Lending) to passive income generators such as: Yield Farming (Sushi Yield Farms) and Staking (SushiBar Staking). Similar to other DeFi projects, the products are managed by investors who own SUSHI tokens.

Some information about SushiSwap

SushiSwap is a decentralized, permissionless exchange under the AMM model and is the first product of Sushi. SushiSwap allows users to trade peer-to-peer with liquidity provided by other users. Initially SushiSwap was fork from Uniswap V2, so the operating model of SushiSwap is similar to Uniswap , but there are some differences. 

Read more: Uniswap (UNI) on-chain analysis launches Uniswap V3 what data reveal?

Difference between SushiSwap and Uniswap

Same: both projects are AMM and use classic curve algorithm with formula x*y = k; Liquidity Pool model with 2 tokens with the same ratio 1:1; transaction fee is 0.3%.

Different: 

• Uniswap: liquidity providers (Liquidity Providers) will enjoy full 0.3% transaction fee and no liquidity mining program (Liquidity Mining).
• SushiSwap: liquidity providers (Liquidity Providers) will only enjoy 0.25% transaction fees and 0.05% will be for investors holding xSUSHI, and there is a liquidity mining program (Liquidity Mining) - incentivizing users provide liquidity and will be rewarded with SUSHI tokens.

Operation model of SushiSwap

SushiSwap's operating model – Multichain AMM

The similarity of SushiSwap and Uniswap lies in the liquidity pool model and the classic curve algorithm x*y = k. Both of these things I have detailed in the article "Analyzing the operating model of Uniswap V2" so you should read this article first, to understand how a typical AMM model works. Within the scope of this article, I will only explain in detail the differences of SushiSwap

Components participating in the model include: 

• xSUSHI holders: are SUSHI holders who bring SUSHI tokens to Staking and receive APR/APY levels depending on the time you Staking (since I wrote this article, the APR is 6.84%) and in return must lock SUSHI within 6 months, the interests of xSUSHI holders will receive a portion of the revenue from SushiSwap's products, which can be considered the creators of this playground.
• Liquidity Provider (LP) for short: acts as a supply, providing assets to create liquidity for the market.
• User (User/Trader): acting as a demand source, users can trade any token available on SushiSwap and pay 0.3% fee for each transaction.

The operation process of the SushiSwap model is described in 4 main steps:

Step 1: The liquidity provider (LP) will provide 2 types of assets (A and B) to the respective liquidity pool (A/B) on SushiSwap with the ratio 1:1. Then receive the SLP token (Sushiswap Liquidity Provider), this token represents ownership of a part of the assets in that pool. 

Step 2: Users (User/Trader) who want to swap (swap) token A to token B must put token A into the corresponding pool and receive token B.

Step 3: For each swap, users have to pay 0.3% transaction fee, 0.25% of this fee will go to the liquidity provider (LP) and 0.05% to xSUSHI holders.

Step 4: To encourage Liquidity, in addition to receiving 0.25% transaction fee, you can also bring SLP tokens to Staking and receive more SUSHI tokens, this program is called Liquidity Mining to encourage the provision of liquidity. account more.

The details are illustrated in the following figure:

SushiSwap's operating model – Multichain AMM

So how is the SushiSwap model better than Uniswap V2?

Improvement of SushiSwap aims to solve problems of profit optimization, more incentives and especially can overcome high Slippage when there is not enough liquidity.

• For Sushi Holders: receive 0.05% and Uni holders do not, although both hold almost similar roles.
• For Liquidity Providers: SushiSwap integrates a long-term Liquidity Mining program. As I mentioned, the biggest risk of liquidity providers is to suffer an temporary loss (Impermanent loss), the fact that SushiSwap integrates this program to help generate profits while LPs deposit crypto assets. into the Liquidity Pool to minimize a part of the loss if the market fluctuates during the liquidity provision.
• For users (Users/Traders): the above incentive will help SushiSwap attract liquidity providers and create a rich source of liquidity that will reduce the risk of slippage (Slippage). Along with that, helping SushiSwap attract more users, the cost of xSUSHI holders and liquidity providers will be more.

In short, the innovation of SushiSwap is to optimize costs and rewards for all participants. The incentive program to use SushiSwap is quite good and has also attracted a lot of liquidity providers, helping the liquidity source to become rich. The proof is that TVL has reached $2.7B USD, making SushiSwap the 3rd correct decentralized exchange (DEX) in the top DEXs with the highest amount of TVL.

Keyed Value (TVL)

Operation model of other products of Sushi

SushiBar's operating model

SushiBar is a place for SUSHI holders to bring SUSHI tokens to Staking to receive xSUSHI tokens, and at the same time receive benefits from other Sushi products such as transaction fees on SushiSwap, service fees on BentoBox, voting rights and other benefits.

Working model of BentoBox – a wallet containing tokens

BentoBox is a Vault containing all the tokens that generate profits for liquidity providers. When users deposit crypto assets into BentoBox and will receive annual return (APY). BentoxBox serves as the infrastructure for future DeFi protocols coming soon on SushiSwap and the first protocol is Kashi, the operating model of BentoBox is as follows:

Step 1 : Liquidity provider deposits crypto assets into BentoBox and gets benefits in return such as: annual profit, cost reduction when using other services or products of Sushi, low gas fee when trading tokens inside the Vault,…

Step 2 : When users use BentoxBox's service, they will pay a part of the fee depending on the type of service, this fee will be divided among xSUSHI holders (those who bring SUSHI tokens to Staking).

The details are illustrated in the following figure:

Working model of BentoBox – a wallet containing tokens

Operation model of Kashi Lending

Kashi is the first product suite of BentoBox, the model is similar to the lending and borrowing platforms, but the unique feature of Kashi is that it allows to borrow and lend in pairs (Isolated Lending Pair). There are: lenders (Lenders), borrowers (Borrowers) and borrowers (BentoBox – Vault contains the lender's tokens), Kashi's operating model is as follows:

For Lenders:

Step 1 : Lenders will deposit crypto assets into BentoBox, similar to a liquidity provider, so they will receive the same benefits as I mentioned above.

Step 2 : Select the Pool corresponding to your assets to lend and earn interest.

For Borrowers:

Step 1 : Borrowers provide collateral to BentoBox.

Step 2 : Select the Pool corresponding to the token you want to borrow to borrow the token and pay the loan interest.

The details are illustrated in the following figure:

Operation model of Kashi Lending

Unique features of the Kashi Lending model:

Low gas fees: supported by BentoBox, helping Kashi reduce unnecessary transactions.

Allows users to create their own Lending pairs with simple operations: just choose a type of token as a lending asset, a type of token as collateral, and users can create a Lending pair on Kashi.

Separate Pools: the benefit of separate Pools is to ensure the safety of the system, if there is a hacked token, it will only affect the Pool containing that token, not affect the remaining Pools and create the market. Diversify more tokens to borrow and lend.

Miso – IDO (Initial Dex Offering) platform

MISO is an open source set of smart contracts created to simplify the process of launching a new project on SushiSwap. Similar to other IDO platforms, Miso was created to be a launch pad for researchers and project developers to easily access the crypto investor community to launch projects, as well as promote projects. push capital through trading tokens on SushiSwap.

Read more: What is an IDO? Today's popular IDO platforms.

Miso ingredients include:

Token Factory: where to create tokens for projects.

Market: where IDO is conducted, Miso supports the auction form Crowdsale and Dutch & Batch.

Liquidity: a part of capital raised from IDO will create liquidity for SushiSwap.

Fermentation: storage/escrow options to lock tokens over time.

Farm Produce: new IDO tokens will be farmed in SushiSwap's Liquidity Mining program.

To give new projects the best chance of launching on SushiSwap, the ingredients in Miso will be combined in different ways depending on the project. Therefore, I will limit my in-depth analysis of Miso's model, but readers can imagine the most basic way through the image below:

Miso – IDO (Initial Dex Offering) platform

Note: In (2) the project will be the one to decide how the components of Miso are combined.

Mirin working model – a feature coming soon

Currently this feature has not been released, in the future Mirin will be released with SushiSwap V3. Simply put, Mirin will help Sushi combine with a centralized exchange ( CEX ) or a certain 3rd party, allowing users to provide liquidity to SushiSwap through the exchange, this liquidity will be contained in The subpool is linked to the main liquidity pool of SushiSwap, you can imagine through the illustration below:

Mirin working model – a feature coming soon

Overview of how the whole system works in the SushiSwap . model

Thus, here you can have a basic understanding of the operating models of SuShi's products. Now I will summarize the overall operation of the whole SushiSwap model as follows:

• (1) Sushi provides a system of products that users need in a decentralized exchange and more, including: trading (Swap/Trade); Borrowing and lending (Lending & Borrowing), Yield Farming and Staking… along with the Liquidity Mining liquidity supply incentive program. This activity is happening on AMM SushiSwap, Kashi Lending and BentoBox.
• (2) Through cooperation with 3rd parties/centralized exchanges, which simplifies technical operations, especially for users who have never worked on any DeFi platform, they can still easily Easy to use SushiSwap products thanks to Mirin's model (coming soon). 
• (3) Create a launching pad for project developers to help Sushi build a quality trading market to attract more investors. Thereby accessing new projects as well as SushiSwap thanks to Miso's model and Liquidity Mining program.
• (4) Transaction fees: transaction fees will go directly to xSUSHI holders and liquidity providers.

The details are illustrated in the following figure:

Overview of how the whole system works in the SushiSwap . model

So does SushiSwap's operating model work?

SushiSwap is no longer just an AMM forked from Uniswap V2 but has become a system operating under a diversified product model serving many audiences. The solution that SushiSwap brings is to optimize the efficiency of capital use, while partially limiting the risk of slippage when trading. The products are all aimed at creating a rich source of liquidity. In my personal opinion, this is a very good model for SUSHI holders and other users when integrating many utilities and products into the same system. However, if you look at the opposite side, it is difficult to control many products and it is difficult to ensure that all products are working effectively. So I finished analyzing the operating model of SushiSwap,DeFi or not?

Epilogue

Above is information about the operating model of SushiSwap from many sources that TraderH4 synthesizes and researches for readers. Hope to help you better understand the project and operating model of a typical multi-product integration model like SushiSwap.

Does the solution that SushiSwap brings to the crypto market really work? Discuss with us at Telegram Group TraderH4. And don't forget to visit TraderH4's website to quickly update the upcoming events of the project. See you again in the next issue of "Active Model Analysis" of TraderH4.

Note: All information in this article is intended to provide readers with the latest information in the market and should not be considered investment advice. We hope you read the above information carefully before making an investment decision.

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