The decentralized finance craze continues to thrive and bring surprises as the YFI cryptocurrency continues to climb to record levels, worth many times the value of Bitcoin.

Announced on August 26, the “SushiSwap” project announced a decentralized exchange protocol aimed at competing with Uniswap, offering more incentives to liquidity providers.

Project “SushiSwap”:

in Advertising Released on August 26, a team of developers revealed the SushiSwap project that aims to compete with Uniswap with the introduction of a cryptocurrency called SUSHI.

The project team relied on one of the basic concepts that the Uniswap platform operates on, which is to provide liquidity by providing incentives, and adding more incentives to those who decide to share their cryptocurrencies in the protocol.

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With Uniswap, liquidity providers receive a share of the trading fee from the pool as long as they provide liquidity in it.

With SushiSwap, users can also provide liquidity and get fee rewards, but they can also hold the digital currency SUSHI and still receive part of the fee, the mechanism of the coin is similar to that of Uniswap.

• 0.25% of the fee goes to liquidity providers.
• Transfer 0.05% of the fee back to SUSHI and distribute it to SUSHI holders.

With Uniswap, liquidity providers receive 0.3% of the fees generated in the pool.

Initial liquidity provision stage:

According to the official announcement, the team is aware that a lot of people are the existing liquidity providers in the Uniswap pools.

Hence, they made it possible to start providing liquidity and earning SUSHI coins by placing Uniswap LP coins in an initial pool of pools.

Pools available initially and supported are the COMP and LEND lending protocols and the various decentralized finance currencies SNX, UMA, LINK, BAND, AMPL, and YFI.

For this initial stage, the protocol will mint new coins every time a block is mined on the Ethereum network.

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The SushiSwap protocol started doing this in block 10.75000.

The idea is to generate 100 new SUSHI coins in each block, but for the first 100,000 blocks, the amount of generated SUSHI will be multiplied 10 times, as 1,000 SUSHI coins will be minted per block.

This is to stimulate investors and early adopters of the protocol and to help attract liquidity.

In fact, the incentive appears to be working with more than $350 million already locked up in the protocol.

Liquidity Transition Phase:

Once the 100,000 Ethereum has been mined, which should take place in about two weeks, the cryptocurrencies will be migrated to liquidity via SushiSwap contracts.

This process will involve taking all Uniswap LP coins stored on SushiSwap at that time, redeeming them from the currency pairs and creating new combinations with those coins.

Dealers do not need to do anything and will continue to receive SUSHI rewards while providing liquidity in the future.

Now, with all of the above mentioned, it is essential to understand that the project has not been audited, leaving those involved exposed to the unknown risks of smart contracts.

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The team called several audit firms and promised to pay 5 ETH to the party that goes through the process.

Two weeks ago, another project received just as much, if not greater, fanfare than the current one, YAM.

However, shortly after the project was released, the team found a fatal error in the code, which made the entire protocol quickly unmanageable.

New SUSHI Coin Price Collapse:

According to CoinGecko data, the price of SUSHI has fallen from around $170, when the coins were first issued, to $1.15 where it is currently trading which means a 99% drop.

It is worth noting that 10% of the total supply of SUSHI coins is allocated for future development of the protocol.

It seems that the collapse of the new SUSHI coin collected by stimulating liquidity providers has to do with the amount of stimulus as the category of liquidity providers sell their rewards for profit.

In addition, the risk of non-permanent loss in the SUSHI-ETH pool is very large, given the sharp decline.

In any case, even though it may be a project that is currently getting excited in the crypto community, it remains especially important to do your research and examine the project carefully before investing anything in it.

As usual, our usual advice on Arab Bitcoin is not to invest and never spend money that you cannot afford to lose.

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