What is SushiSwap?
SushiSwap — often referred to as just Sushi — is an automated market maker (AMM) system built on top of the Ethereum blockchain. AMMs are tools for the DeFI (decentralized finance) sector by helping to power the market’s liquidity. Instead of directly pairing buyers and sellers of crypto assets, AMMs like Sushi create liquidity pools of assets available to trade and leverage smart contracts to execute trading automatically.
SushiSwap is a fork from the Uniswap protocol (see below in this Help Centre article for an overview of Uniswap), and the project had a rocky birth. Its pseudonymous founder, Chef Nomi, pitched the project as a similar system to Uniswap but with added functionality, namely a governance token providing voting rights to holders. As a way of distributing the initial SUSHI tokens, Chef Nomi invited supporters to stake Uniswap Liquidity Provider (LP) tokens on Sushi to earn SUSHI, claiming that they would then exchange the staked Uniswap assets for funds to power further development of the Sushi project. Instead, however, Chef Nomi withdrew the funds for themselves. Long dramatic story short, the funds were returned and control of the protocol was handed over to the CEO of FTX, a crypto exchange.
A deep dive on the mathematical formulas guiding liquidity pool trading is not necessary here, but it essentially recreates supply-and-demand economics at the asset level. This ensures that the price of assets in the pools tracks reasonably close to its true market price. Traders do pay a trading fee, however, which is distributed to liquidity providers to incentivize participation in the platform.
Decisions on how the Sushi protocol operates and evolves over time are made by its community, defined as holders of the protocol’s governance token, SUSHI. Notably, in December 2020, Sushi joined forces with yearn.finance, another DeFi protocol, which means that they will share development resources and some market infrastructure, among other aspects of the platforms.
What is the SUSHI token?
SUSHI is an ERC-20 token created by the Sushi protocol intended to ensure distributed and participatory governance. Anyone who holds SUSHI tokens can stake them to earn both voting rights and rewards. Voting rights allow holders to vote on proposals from the Sushi community to make changes to the protocol. Staked SUSHI also earns stakers a percentage of the platform’s trading fees charged to traders, proportional to the amount of SUSHI staked (and 2/3 of the SUSHI rewards earned must vest for a period of time before they can be cashed out.)
Risk statement
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.
No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.
Wealthsimple has performed an assessment of whether SUSHI can be supported by Wealthsimple’s platform, including whether SUSHI is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated SUSHI based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of SUSHI, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SUSHI;
- The supply, demand, maturity, utility and liquidity of SUSHI;
- Material technical risks associated with SUSHI, including any code defects, security breaches and other threats concerning SUSHI and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with SUSHI, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SUSHI; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether SUSHI, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to SUSHI may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support SUSHI.
Like all other crypto assets, there are some general risks to investing in SUSHI. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SUSHI. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024
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