Most recent update: [March 16, 2022]
No securities regulatory authority has expressed an opinion about the Crypto Contracts or SushiSwap, made available on the VirgoCX Platform, including an opinion that SushiSwap is not itself a security and/or derivative.
What is SushiSwap (SUSHI)?
SushiSwap is an Ethereum-based programme that aims to entice a network of users to create a platform where they may buy and trade crypto assets. SushiSwap achieves this purpose using a set of liquidity pools, similar to platforms like Uniswap and Balancer. Traders buy and sell cryptocurrencies from those pools, switching out one token for another, after users lock up assets in smart contracts.
SushiSwap is one of a growing number of decentralised finance (DeFi) services that lets users to trade cryptocurrencies without the use of a central operator.
Who created SushiSwap?
SushiSwap was launched in August 2020 to immediate controversy. Created by the pseudonymous Chef Nomi, they and their collaborators forked the source code from Uniswap, implementing a key change. Besides Chef Nomi, there two other co-founders also operating under pseudonyms, sushiswap and 0xMaki, who handle the project’s code, product development, and business operations. More recently, ownership had been passed to Sam Bankman-Fried, the well-known CEO of FTX and quantitative trading start-up Alameda Research.
The project gained notoriety due to Chef Nomi and co.’s desire to overtake Uniswap. The team devised a “vampire mining” campaign to drain liquidity out of Uniswap and into SushiSwap’s own liquidity pools. To compound onto the controversy, Chef Nomi had cashed out $14 million of SUSHI from the developer funds for ETH – on Uniswap, no less. After receiving a wave of understandably harsh backlash from the community, Chef Nomi returned the funds and separated themselves from the project, handing the reins over to Bankman-Fried. Bankman-Fried would eventually pass control onto trusted members of SushiSwap’s community, stepping forward to the decentralized SushiSwap that we now see today.
How does SushiSwap work?
SushiSwap’s core function is to allow users to buy and sell assets. Like Uniswap, Sushi is built on an automated market (AMM) system that uses smart contracts to fulfill transactions, meaning there is no order book or primary authority. Trades are processed by the smart contracts through liquidity pools; liquidity is provided by users that lock in their crypto assets into a contract and deposit an equivalent value of two tokens in the pool. As an example, SushiSwap’s USDT/ETH pool consists of equal values of USDT and ETH deposits. Each pair pool works like a market, where users can come to buy and sell their tokens.
SushiSwap currently features a myriad of applications, including the SushiSwap Exchange itself (which features over 100 ERC-20 tokens to swap from), as well as giving users the ability to yield farm, lend/borrow/stake their SUSHI, and to launch their own projects on the SushiSwap platform through the Minimal Initial SushiSwap Offering (MISO). The platform offers several ways to reward users for contributing towards SushiSwap’s ecosystem.
Liquidity providers earn up to a 0.25% cut of trading fees by the above method of depositing an equal amount of two types of assets. They are then given SushiSwap Liquidity Pool tokens (or SLP tokens) which a provider can use for more yield farming.
Staking SUSHI on the platform’s aptly named SushiBar gives the holder xSUSHI, which allows the user to earn a 0.05% reward fee of all trades from all liquidity pools. Under development is SushiSwap’s NFT platform Shoyu, which extends xSUSHI holders to be eligible to receive 2.5% of every NFT trade on the NFT marketplace.
Another cool reward feature on the platform is the BentoBox, which essentially acts as a vault which allows users to take advantage of all available yield farming tools on SushiSwap. This allows users to deposit their assets into BentoBox and automatically earns them interest from staking on SushiBar while also earning them rewards from the transaction fees accrued from the vault.
Like all other Ethereum-based platforms, SushiSwap is beholden to rising gas and transaction fees from network congestion. Smaller deposits may need a lot of farming before any profit can actually be realized. To try to counteract this, SushiSwap has begun expanding to other blockchains and implementing layer-2 scaling solutions to help minimize fees and speed up transaction confirmations.
Another drawback might be SushiSwap’s novel theme, as itself and all of the features within its ecosystem are all centralized around the Japanese cuisine naming scheme. This relatively unprofessional theme might make the platform unattractive to serious investors and experienced yield farmers. Furthermore, Chef Nomi’s attempted rug pull earlier in the project has left a lasting distaste in the cryptocurrency community’s mouth, despite the platform’s comparatively tasty comeback.
Prior to listing SushiSwap on the VirgoCX Platform, VirgoCX performed due diligence on SushiSwap and determined that SushiSwap is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:
- The creation, governance, and location of SushiSwap and/or its primary development team;
- The supply, demand, maturity and liquidity of SushiSwap; and
- Legal and regulatory risks associated with SushiSwap.
Statutory Rights under Securities Legislation
VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
If you would like to go in-depth on the recipes that SushiSwap offers on its menu, check out these resources here:
SushiSwap on Binance Academy: https://academy.binance.com/en/articles/your-guide-to-sushiswap
SushiSwap on CoinMarketCap: https://coinmarketcap.com/currencies/sushiswap/
SushiSwap on Kraken: https://www.kraken.com/tr-tr/learn/what-is-sushiswap-sushi
SushiSwap on Decrypt: https://decrypt.co/resources/what-is-sushiswap-how-to-buy-sushi-2021
SushiSwap on CoinBureau: https://www.coinbureau.com/review/sushiswap-sushi/