What is SushiSwap?

SushiSwap is a DEX built on the Ethereum blockchain, enabling users to trade cryptocurrencies without intermediaries using an automated market maker (AMM) model. Launched in August 2020, SushiSwap has quickly gained popularity within the decentralized finance space. It originated as a fork of Uniswap, but has since developed its own unique features, expanding to multiple blockchains while introducing innovative products and services.

How SushiSwap works

SushiSwap operates using an AMM model, which means traders interact with liquidity pools instead of traditional order books. These liquidity pools are created by users who deposit two types of tokens, thus providing liquidity to the platform. In exchange, they are given LP tokens that signify their proportional ownership in the liquidity pool. These LP tokens allow users to earn a share of the fees generated from trades within that pool.

For instance, if a trader wants to swap ETH for DAI, they can interact with the ETH/DAI pool by depositing ETH and receiving DAI based on the pool’s current ratio. The liquidity providers (LPs) earn trading fees for facilitating these transactions and can stake their LP tokens in yield farms to earn SUSHI, the platform’s native token.