- INVESTMENT IDEAS
SUSHI – The exhilarating taste of freedom
- Stake SUSHI for xSUSHI and provide liquidity for extra gains.
- Token holders receive 0.05% of trading volume as xSUSHI tokens. Staked SUSHI can still participate in the governance of a true DAO.
- Token inflation depends on the trading volume. Competition between DEXes is fierce.
- Simply holding SUSHI will not deliver good results. Stake and LP for yield and participate in governance.
Time for Sushi - Order out or dine in?
SUSHI and xSUSHI are the native tokens of Sushiswap, currently the number five decentralised exchange by daily volume. With a crime at the outset and a unique focus on radical decentralisation, Sushiswap has become one of the most controversial projects in crypto.
Its erstwhile founder, Chef Nomi, absconded with $14m worth of Ethereum just ten days after its founding, only to return everything days later. He then turned his hostile takeover of Uniswap’s liquidity pools into a distributed autonomous organisation, governed and funded by the leaderless collective of token holders.
The Generalist has condensed the story of Sushi’s ‘founding murder’. Highly recommended reading.
Initially, SUSHI (an ERC20 token) was highly inflationary, with some tokens backed by transaction fee payouts. Its rising price made the rewards seem miniscule compared to the value of the extra 100 SUSHI minted per Ethereum block.
The community voted for a maximum of 250m tokens with issuance tapering off towards zero in 2023. Hmm, now why would token holders not vote for inflation? I wonder...
Much more than raw fish
Akin to Binance’s BNB, which Numbrs covered recently, SUSHI plays a central role in the exchange. 0.05% of all trading volume is distributed to token holders. Staked SUSHI, called xSUSHI, can provide liquidity in pairs with WETH, DAI and others, for further rewards.
With no formal leadership of any kind, only SUSHI holders govern SushiSwap, a truly decentralised organisation. Even their famed community lead, who went by the pseudonym 0xMaki, has recently stepped down and transitioned to an advisory role. Holders can stake, pool or farm tokens in parallel with active participation in a true DAO.
SushiSwap’s developers were highly productive in the last year. The team of over 20 launched the Kashi and Miso protocols, deployed on over 10+ EVM-compatible chains (Polygon, Arbitrum, Fantom, Harmony, xDai, Avalanche, Moonriver and more) and are about to release an NFT marketplace called Shoyu.
SUSHI’s token holders have made sure that holding is profitable in the short and long term, by voting for a hard maximum of tokens.
Beware of food poisoning
Many critical voices still see SushiSwap tainted by Chef Nomi’s initial rug pull. This is not doing the project justice. The money was returned and the community built back better and stronger. Truly leaderless, Sushi is now a prime example of a DAO.
In September 2021, the exchange won some market share from arch-rival Uniswap, with nearly 20% of all DEX trades happening on Sushi, and hosted IDOs on its Miso platform.
The price of SUSHI has risen accordingly. The crux of holding SUSHI is that inflation depends on trading volume.
With 0.05% of all volume paid out as fees, the corresponding value of tokens can be called backed tokens. The rest is dilution and creates downward pressure on the token price, as investors adjust their valuations accordingly. Although written shortly after Sushi’s launch, when the token was still inflationary, Glassnode did an amazing job of covering SUSHI’s last year's tokenomics in this article.
Sushi - no buy and hold - spoils quickly
Simply holding SUSHI is something that cannot be recommended to investors. The token is likely to remain net inflationary for a year or more, depending on how trading volume develops. With stiff competition from dYdX, Uniswap and others, there’s no guarantee of SushiSwap’s longevity.
An active investor, who can stomach the gas fees, can stake SUSHI for xSUSHI and then convert half into WETH and provide xSUSHI/WETH pairs for a double yield whammy.
SushiSwap is a fascinating project and has proven resilient and adaptable. Just holding SUSHI tokens is not likely to yield good returns. Combine an investment with staking and liquidity provision and the scenery becomes a lot more pleasing.
As an added incentive, holders can participate in a truly novel form of corporate governance by steering the exchange’s development.
Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.