Sushiswap is a decentralized exchange (DEX) operating on the Ethereum platform, renowned for its employment of an automated market maker (AMM) system rather than a traditional order book. This unique approach allows users to combine two different assets into a liquidity pool, where they are subsequently traded based on the prevailing ratio between the two. Initially a fork of Uniswap, Sushiswap has evolved into a diversified and grassroots alternative in the decentralized finance (DeFi) landscape.

The Emergence of Sushiswap

Sushiswap commenced its journey as a simple replica of Uniswap. What differentiated it, prior to the Uniswap governance token airdrop, was the introduction of both a governance token named SUSHI and liquidity mining.

In the early days, Sushiswap enabled users to stake Uniswap LP tokens on their platform to earn SUSHI governance tokens. However, the situation took an interesting turn when Sushiswap's enigmatic creator, popularly known as Chef Nomi, planned to redeem the same Uniswap LP tokens for assets to be transferred to Sushiswap. This maneuver received the moniker "vampire attack."

Initially, there was a massive incentive to shift liquidity from Uniswap to Sushiswap, resulting in a surge in liquidity on Uniswap as investors sought after higher yields.

On September 5th, 2020, Chef Nomi drained the development fund and converted it into 37,400 ether, equivalent to approximately $14 million at the time. This event caused SUSHI's price to plummet by over 70% in less than a day. Succumbing to community pressure, Chef Nomi eventually relinquished control of the Sushiswap smart contract's private key to Sam Bankman-Fried, the CEO of FTX. The migration of liquidity from Uniswap to Sushiswap occurred on September 9th, 2020, involving the transfer of $830 million in liquidity. Finally, on September 11th, 2020, Chef Nomi voluntarily returned the ether and issued an apology to the community.

Uniswap, on the other hand, remained relatively unscathed by the Sushiswap pump and migration incident. Its liquidity levels gradually returned to normal, with a slight increase observed.

In response to Chef Nomi's dubious actions and subsequent departure, the Sushiswap community swiftly implemented clear rules pertaining to ownership and control of the protocol. This was crucial for establishing a sustainable path forward. The ownership of Sushiswap was successfully divided between Multisig and Operations Multisig addresses.

To delve deeper into the early history of Chef Nomi and Sushiswap, refer to The Sushi Chronicles.

A Mosaic of DeFi: Sushiswap's Role in the Puzzle

On November 30th, 2020, Andre Cronje, the founder of Yearn.finance, announced the merger between Yearn and Sushiswap. This collaboration ensured that both entities could actively share development resources while maintaining separate tokens and governance systems. Additionally, Sushiswap became the platform through which Yearn's research and development (R&D) pipeline for Automated Market Makers (AMMs) would be launched, including the notable Deriswap.

For more information regarding the Yearn-Sushiswap merger, refer to Andre Cronje's post.

Envisioning Diversification: Sushiswap's Journey Ahead

With its compelling liquidity mining incentives (onsen), powerful brand presence, and continuous delivery of innovative features, Sushiswap has transformed into a prominent decentralized exchange and a favored platform for launching new projects.

In 2021, Sushiswap aims to expand its horizons by venturing into domains such as lending, options, futures, and capital markets.