SushiSwap is a decentralized exchange built on Ethereum that utilizes an automated market making system rather than a traditional order-book. Instead of matching individual buy and sell orders, users can pool together two assets that are then traded against, with the price determined based on the ratio between the two. SushiSwap began as a fork of Uniswap; however, is growing into a more diversified, more grassroots alternative. SushiSwap began as a simple fork of Uniswap. What made it different at the time of launch and prior to the Uniswap governance token airdrop, was SushiSwap that offered both a governance token (SUSHI) and liquidity mining.
SushiSwap initially let its users stake Uniswap LP tokens on SushiSwap to earn SUSHI governance tokens. After about two weeks, SushiSwap’s creator, a polarizing figure who goes by the pseudonym Chef Nomi, planned to redeem those same Uniswap LP tokens for assets that would be transferred to SushiSwap. This was coined as a vampire attack.
Initially there was a large incentive to move liquidity from Uniswap to SushiSwap, which led to the spike in liquidity on Uniswap as investors chased the high yields. On September 5th, 2020 Chef Nomi drained the development fund, swapping it for 37,400 ether, worth some $14 million at the time. SUSHI’s price dropped over 70% in less than a day. The next day, facing pressure from the community, Chef Nomi turned the private key to the SushiSwap smart contract over to FTX CEO Sam Bankman-Fried. Bankman-Fried postponed the migration, which would go on to take place on September 9th, 2020, and migrated $830 million of liquidity from Uniswap. Eventually on September 11th, 2020, facing pressure from the community, Chef Nomi voluntarily returned the ether and apologized to the community.
Uniswap was relatively unaffected by the SushiSwap pump and migrate – the exchange’s liquidity levels returned to their prior levels following SushiSwaps liquidity migration - even increasing slightly.
Following dubious action from Chef Nomi and its subsequent departure, the community quickly organized clear rules for ownership and control of the protocol in order to move forward in a sustainable way. The effective ownership of SuhsiSwap got split into Multisig, and Operations Multisig addresses.
Another Piece of the DeFi Puzzle On November 30th, 2020, Andre Cronje, founder of Yearn.finance, announced Yearn would be merging with SushiSwap. The merger meant that Yearn and SushiSwap would share development resources, but still maintain separate tokens and governance systems. Additionally, Yearn's AMM related R&D pipeline including Deriswap would launch through SushiSwap.
Thanks to aggressive liquidity mining incentives (onsen) coupled with strong branding and relentless shipping of new and innovative features, SushiSwap has become a leading decentralized exchange and a privileged venue for new projects launches.
