By Bentley Kapoor (India)
The automated market maker, SushiSwap has moved up its launch by five days, as it is aiming to unseat the current market leader, UniSwap. There has been a $1.5 billion increase in the total value of assets that are locked on UniSwap and this is all because of SushiSwap. According to DeFi Pulse, this surge in value occurred after the SushiSwap contract had gone into effect on August 28th on block 10750000. Therefore, UniSwap has become the largest holder of Ethereum assets right now in DeFi. Both SushiSwap and UniSwap are designed to always have a price at which they will be willing to swap any two tokens that can be found in their liquidity pools.
The liquidity mining scheme of SushiSwap allows one app to drive liquidity into the other one. Those who help SushiSwap in competing on its liquidity are promised a reward in the form of a fee on trades, along with fresh governance tokens, which will also assist them in earning a portion of trading fees. There is no governance token that can be found on UniSwap because this is a venture-backed company. Therefore, it rewards the liquidity providers (LPs) by sharing the 0.3% fee on all trades in the pools in which they have submitted liquidity as well.
You would have to explore the weeds of DeFi composability in order to understand how this works. As per the original design of the launch of SushiSwap, an extra-large share of SUSHI would be given to Ethereum users if they deposited Uniswap V2 LP tokens before the launch of SushiSwap in the two weeks after block 10750000. There are a series of pools on UniSwap having two tokens each. Exchanges between any two of the ERC-20 tokens can be made by the users with the help of these pools. There is a unique LP token for every pool and it is given to the users when they deposit liquidity.
It is possible to withdraw these LP tokens at any time for the users’ share of the pool. Users are being given an incentive by SushiSwap for depositing large amounts into Uniswap and then providing SushiSwap the LP tokens they will receive for doing so. Hence, all these LP tokens will be redeemed by SushiSwap at the appointed time, thereby transferring a great deal of UniSwap’s liquidity onto their own. This has been given the term ‘vampire mining’ by some.
Obviously, the same amount of SushiSwap LP tokens have been promised to depositors of UniSwap’s LP tokens, so everyone will be whole. As per one tool that’s tracking the expected token share at SushiSwap, they already have LP tokens that are 79.9% of UniSwap’s liquidity. This liquidity withdrawal had been scheduled originally for September 11th when the two week bonus period came to an end. However, SushiSwap’s creator, NomiChef submitted a new proposal on Thursday, which moved the timeline by 48 hours from the ‘timelock’, which is expected shortly after the voting ends. The voting ended on Friday with nearly 87% SUSHI holdings voting positively, meaning the liquidity shift will happen on Sunday.
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