SushiSwap's Blue Chip Counterattack
Editor's Note: This article comes fromIOSG（ID： IOSGVC）, reprinted by Odaily with authorization.
Editor's Note: This article comes from
, reprinted by Odaily with authorization.
The potential of Sushiswap:
Compared with Uniswap, Sushiswap has a stronger community base support because of its early fair launch distribution. Teams voted by the community have higher incentives to perform development work, resulting in a lot of innovation.
Sushi will soon launch the V2 version of the Mirin protocol, and cooperate with centralized exchanges to increase liquidity by more than 10 times. At the same time, the dual-revenue governance token model will also encourage users to participate in liquidity mining. In the future, it will support layer 2 products of ZK Rollup, and support Polkadot's cross-chain transaction protocol.
Sushi Token has a sound value-added mechanism to drive up prices, making liquidity mining very attractive. In terms of protocol value capture, compared to uniswap, which currently has no profit plan, Sushi can obtain dex transaction fees, which will benefit Sushi’s future token value-added
Risks of Sushiswap:
The team has yet to demonstrate execution capabilities, with most innovations still in development
The total number of users is relatively small
Most of the trading volume is generated by arbitrage, which has a strong dependence on large liquidity providers
If the roadmap (BentoBox, Deriswap, MIRIN program, etc.) can be successfully executed, Sushiswap could threaten the dominance of Uniswap.
The transaction volume of decentralized exchanges (DEX) in 2020 exceeded 100 billion US dollars, and more than 1 million different addresses interacted with the DEX protocol. Among the DEX protocols, automated market makers (AMMs) have become the mainstream solution.
The AMM mechanism allows token holders to effectively use their assets when conducting market transactions and enjoy passive income from transaction fees. Although in certain market environments liquidity providers (LPs) suffer losses, recent research has shown that (in the long run) profits from transaction fees generally outweigh short-term losses. Furthermore, the profitability of LPs is expected to continue to improve as more hedging solutions become available in the market.
Finally, AMMs are important for market transactions of new coins, and it is the most popular solution for generating new protocols and facilitating long-tail token transactions. Since the AMM protocol does not require permission, the process of listing new tokens is also extremely simple. AMM protocols are still profitable, and this advantage will continue.
In this post, we will take a deep dive into one AMM solution that has attracted a lot of attention lately - Sushiswap.
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Sushiswap - more than forks
Among the DeFi blue-chip portfolios, Sushiswap has the most ambitious development roadmap. Sushiswap was launched in September 2020 by anonymous founder Chef Nomi. It is forked from Uniswap, and allows the DeFi community to participate in protocol development, while issuing Sushi Token that can grow profitably steadily. On the first day of issuance, Sushiswap attracted a total lock-up volume of US$1.1 billion, but the anonymous founder’s sell-off and the issuance of UNI tokens caused Sushi to plummet. Later, Sushiswap successfully rebounded after being taken over by FTX founder Sam Bankman-Fried. They elected a new leader "0x Maki", formed a core team, established partnerships with DeFi blue-chip protocols, and most importantly created a development roadmap different from Uniswap.
As of now, the Sushiswap core team is working on the following:
Limit Order Book (https://lite.Sushiswap.fi/#/swap) - With the launch of the second version of the Limit Order Book, Sushiswap traders will be able to reverse trade or find a counterparty on the order book Trading.
Bento Box - a lending protocol specifically for long-tail assets, allowing traders to use multiple tokens for short-term leveraged transactions.
Merging Derivatives Exchanges - Andre Cronje decided to merge Deriswap into Sushiswap. Therefore, Deriswap will be merged into the Sushiswap interface to provide derivatives trading to the Sushi community. Sushi tokens will generate income from the above products.
Cross-chain AMM - Sushiswap announced support for the Polkadot ecosystem. This will be achieved in cooperation with Moonbeam.
Transitioning to layer 2 - Zk-rollup is the preferred solution for Sushiswap. As announced by 0xMaki, every major decision will be made in tandem with the Yearn community, moving multiple protocols to the same layer 2 solution. Once the migration is complete, they can take advantage of lower transaction fees while maintaining composability: this will be a big competitive advantage for Sushiwap.
Cooperation with CEX - Sushiswap leadership has shown the ability to think outside the box. They noticed that centralized exchanges have locked up huge amounts of capital, and Sushiswap decided to seek cooperation with centralized entities through the MIRIN program.
Looking at the points above, it's interesting to note that many are the result of an open-door policy (allowing anyone to submit a proposal to be voted on by the community), as well as some ideas coming from internal core teams. Sushiswap, on the other hand, has yet to prove its execution efficiency, as most projects are still under development. So far, Sushiswap's main product is still a trading platform that follows the constant curve AMM mechanism. Therefore, in the next section we compare Sushiswap with other major DEXs.
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Data comparison between Sushiswap and other DEXs
In the DeFi space, Uniswap trading volume is still unmatched, usually accounting for about 50% of the total trading volume of DEX. However, as of recently, Sushiswap has changed the market, reaching 20% of the total daily DEX trading volume.
However, Sushiswap’s daily user count is even less than 1% of the total daily users of all DEX platforms.
Sushiswap and Uniswap have similar transaction volumes, but are far behind in terms of number of users, which means that the user profiles of Sushiswap and Uniswap are very different. The daily transaction volume data of daily users shows that each Sushiswap user trades more than $100,000 per day. On the other hand, Uniswap users trade less than $10,000 per day.
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What do these data mean?
Uniswap was one of the first solutions designed using AMMs. Over the years, they have built a loyal user base and integrated with many DeFi protocols.
Sushi, on the other hand, has just entered the game and it has not integrated other DeFi protocols like Uniswap. Although Sushi forked, Uniswap's user base was not affected, so Sushi had to build a user base from scratch.
However, Sushiswap has been very successful in attracting liquidity. Considering that constant-curve AMMs rely on arbitrage to adjust the price in the pool, having a total lock-up of $2 billion will attract large arbitrage activities, where the opportunity for arbitrage profits is almost uniform.
Therefore, even if Sushiswap has only a few real users, as long as the total lock-up volume is high enough, the arbitrage robot will generate huge trading volume.
This means that for protocols that rely purely on pricing curves, liquidity providers are far more important than traders. No matter how many traders there are, the arbitrage bot will ensure that the higher the total lockup, the greater the volume generated by the protocol.
A higher total locked position means a larger transaction volume. Not only that, but it also creates a positive cycle, bringing more income to Sushi holders while increasing the price of Sushi, making Sushi mining more attractive, thereby further pushing up the total lock-up volume.
Therefore, a simple formula - as long as you win the total locked amount TVL, you can win the market.
In this regard, Sushiswap’s MIRIN program could be an important move. Especially under the blessing of MIRIN, Sushi is like a hand that is reaching out to the centralized exchange (CEX). CEX can allow its users to use their tokens to provide liquidity for Sushiswap to obtain LP income and Sushi token rewards.
However, for Sushiswap, in order to attract more capital and ensure that the current liquidity providers will abide by the agreement even if the mining rewards are reduced, it will be extremely important to develop a hedging solution for impermanent losses of.
In addition, Nansen also published a study pointing out that funds such as Alameda and 3AC are the largest liquidity providers on Sushiswap. While not specifying how much liquidity is controlled by these minority funds, if the funds account for a significant percentage, losing that support could seriously hurt Sushi's interests.
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How the market perceives Sushi
To observe Sushi's market view, we compare multiple decentralized exchanges using the same metric - assuming fully diluted market capitalization volume. That said, some protocols have no revenue, so to normalize comparisons within the industry, we use transaction volume as the numerator. As for the denominator, we use fully diluted market capitalization rather than circulating market capitalization because it allows for better comparisons. However, this calculation result is not perfect, and it does not fully explain that the higher the ratio, the more underestimated the value of the token.
A token has reached its highest ratio but is still not undervalued if:
Tokens are not distributed to better develop the protocol
Transaction volume cannot continue to grow
Compared with other DeFi protocols, the development roadmap does not look very attractive
Likewise, a token has reached its lowest ratio and is not overvalued if:
Distribution of tokens will help community growth and protocol development in the future
By this metric, Sushi has been underpriced relative to its competitors for the past few months.
Potential reasons why the Sushiswap ratio is higher than average are:
Sushiswap is undervalued compared to its competitors
The market believes that the current trading volume of Sushiswap is unsustainable.
(i.e. Sushiswap will not be able to keep up with its competitors in the coming months.)
In addition, we look at the price of DODO in the past few months and recently, and the ratio of DODO is the lowest. It shows that the market still has great expectations for DODO V2. As an investor in DODO, we are still very optimistic about the future of DODO despite the strong competitors like Uniswap and Sushiswap. Because DODO uses chainlink oracles to limit arbitrage opportunities, it is unfair for DODO to compare transaction volume with Sushi and Uni.
Summarize
secondary titleSummarizein our recent
"Community tokens are hot, what is changing with a fair launch"
