SushiSwap (SUSHI) is an automated market maker (AMM) — a specific type of decentralized exchange (or DEX) that uses smart contracts to create markets for any given pair of tokens — built on the Ethereum network. More concretely, SushiSwap leverages smart contracts to provide liquidity pools that allow users to trade crypto assets directly — with no intermediary. SushiSwap was launched in September 2020 as a fork of Uniswap, a well-known AMM in the decentralized finance (DeFi) movement. On SushiSwap, users can become liquidity providers, supplying an equal-value pair of two cryptocurrencies in order to receive rewards whenever anyone utilizes that pool. SushiSwap is a decentralized finance (or DeFi) protocol that aims to diversify the AMM market and add features not previously present on Uniswap, such as increased rewards for network participants through its in-house token, SUSHI. SushiSwap's products are open-source and configured in a way that allows the entire platform to maintain decentralized governance of $SUSHI token holders.

SushiSwap operates primarily as an AMM, setting up automated trading liquidity between any two cryptocurrency assets. Concretely, SushiSwap eliminates the need for order books, with the aim to avoid issues such as liquidity problems that can hamper traditional decentralized exchanges, making SushiSwap a potential alternative for DeFi traders and entities looking to capitalize on the boom in project tokens and create liquidity. To add liquidity, users send equal-value amounts of two cryptocurrencies to SushiSwap. In exchange, they receive Liquidity Provider (or LP) tokens and begin receiving rewards. Users can deposit their newly created LP tokens into yield farms to earn further Annual Percentage Yields (APY) rewards. This creates an extra incentive for users to keep lending their cryptocurrencies and remaining part of the liquidity pool over time. The platform takes a 0.3% cut from transactions in its liquidity pools, then compensates liquidity providers with portions of those fees in the form of SUSHI tokens, granting liquidity providers governance rights and the power to influence the platform's operations and future along the way. It's important to note that you can only use Sushiswap to trade one cryptocurrency for another directly — it can't be used to trade US dollars for example, or other government-issued currencies that are not backed by a commodity such as gold.

SushiSwap strives to be an AMM that suits a large amount of decentralized finance (DeFi) needs. It has, among others, two main use cases. Firstly, it allows users to trade cryptocurrencies across numerous pairs and crypto networks without the need for a central operator or administrator using their preferred connected crypto wallet. Secondly, it allows users to receive compensation by yield farming, meaning providing liquidity to a DeFi protocol or exchange and making rewards through fees or additional tokens on the decentralized, community-driven platform.

SushiSwap was founded by a pseudonymous entity known as "Chef Nomi", along with two other pseudonymous co-founders known as "sushiswap" and "0xMaki", who handle SushiSwap's code, product development, and business operations. SushiSwap launched in September 2020 as a fork of Uniswap, meaning by making a change to the Uniswap's protocol and basic set of rulesaiming, to diversify the AMM market and add additional features. The SUSHI token had no premine, meaning it couldn't be minted before the cryptocurrency was launched to the public — which can sometimes be the case for other cryptocurrencies — and was officially launched at Ethereum block number 10,750,000, starting with a supply of zero tokens. As of November 2023, SUSHI had a circulating supply of 231.87 M SUSHI.

Users of Ethereum-based apps like SushiSwap have to pay transaction fees (also called gas) that can vary widely in price and can make it costly to use the network. Decentralized Exhanges (DEXs) have a range of risks, so do your research. For example, bugs in smart contracts can be exploited. Finally, since anyone can create a token, make sure to watch for "rug pulls" of unvetted tokens. "Rug pulls" occur when developers and/or bad actors create and list tokens on a decentralized exchange and request unsuspecting investors swap their ETH or other asset for the new token, only to liquidate the token after accruing a certain level of investments. This liquidation drives down the value of the token to 0.

You can buy SushiSwap through an exchange like Coinbase, in addition to using decentralized exchanges like Sushishwap itself (or Uniswap, a competing decentralized exchange).

Automated Market Making (AMM) is a decentralized exchange protocol that enables users to interact with cryptocurrencies without the need for a central order book or an intermediary. AMMs rely on a liquidity pool and a mathematical formula to determine the prices of assets. When a user wants to interact, they simply allocate their assets to the liquidity pool, which then calculates the price based on the ratio of the two assets in the pool. This approach seeks to offer improvements in liquidity, accessibility, and simplicity compared to traditional order book-based exchanges. SushiSwap, a platform that utilizes the AMM concept, incentivizes users to become liquidity providers. Users allocate their assets into a liquidity pool, and in return, they receive non-monetary incentives in the form of transaction processing rewards and SUSHI tokens. This model seeks to offer improvements within the cryptocurrency interaction experience by reducing dependency on intermediaries and providing non-financial incentives to liquidity providers.

Unlike centralized exchanges that necessitate intermediaries and operate order books, SushiSwap enables users to swap tokens directly from their cryptocurrency wallets. This is facilitated through an Automated Market Maker (AMM) model, which utilizes liquidity pools to enable trades. Users contribute their assets to these liquidity pools and receive a portion of the trading fees, fostering a more participatory trading experience. Moreover, SushiSwap incorporates a community-driven governance model, allowing users to participate in decision-making processes and influence the future of the platform. This level of user involvement and control is typically not present in traditional centralized exchanges. However, it's crucial to note that while SushiSwap seeks to offer a different kind of trading experience, it also comes with its own set of risks and challenges, including potential price volatility and smart contract vulnerabilities.

Users who provide liquidity to SushiSwap's pools are known as liquidity providers. They deposit pairs of assets, usually cryptocurrency, to facilitate trading within the pool. As part of this process, they receive a portion of the transaction fees generated by the platform. This encourages participation in liquidity provision and fosters a vibrant ecosystem of liquidity providers. To provide liquidity, users select a pair of tokens and deposit an equal value of each into a pool. They receive pool tokens as a part of the process, representing their stake in the pool. The pool tokens can be redeemed for the underlying assets at any time. The allocation for liquidity providers comes from the 0.3% trading fee charged on each trade. A portion of this fee is distributed among the liquidity providers proportional to their stake in the pool. However, providing liquidity also comes with risks. Market volatility can result in impermanent loss, where the value of assets in a liquidity pool fluctuates compared to holding them outside. Additionally, smart contract vulnerabilities, hacking risks, and sudden changes in market conditions can expose liquidity providers to potential financial losses. Considering the risks, providing liquidity has its own dynamics for those willing to manage and mitigate potential downsides.

SushiSwap utilizes a decentralized governance model that aims to empower its community members. The SUSHI token is integral to this model, acting as a crucial tool for decision-making and participation. Token holders have the ability to vote on proposals and influence the future direction of the protocol. The voting mechanism is designed to be equitable and transparent, striving to ensure that decisions align with the collective interests of the community. To engage in the governance process, token holders can stake their SUSHI tokens, which provides them with voting rights and additional non-financial incentives. This model facilitates participation and engagement from community members, fostering a sense of ownership and commitment to the protocol’s development. Any token holder can submit a proposal, which is then put to a vote by the community. SushiSwap has implemented a timelock mechanism to prevent hasty or malicious actions. When a proposal is approved, there is a designated timelock period before it can be executed, providing an opportunity for the community to review and challenge the decision if necessary.

The SUSHI token has a role within the SushiSwap ecosystem, functioning as both a governance and utility token. As a governance token, SUSHI holders have the ability to vote on platform proposals, which can influence the development and direction of the SushiSwap platform. This decentralized approach to decision-making is in line with the ethos of the DeFi space, allowing users to have a say in the platform's evolution. In terms of utility, SUSHI tokens are given as non-monetary rewards to those who contribute to liquidity pools. The quantity of SUSHI tokens received is related to the extent and duration of liquidity contribution. SUSHI tokens can be allocated in SushiSwap's SushiBar to receive further non-monetary incentives. The utility of the SUSHI token contributes to the operation and development of the SushiSwap ecosystem.