What is SushiSwap (SUSHI) and How Does it Work?

What is SushiSwap?

SushiSwap, one of the most popular Ethereum-based DeFi platforms, was developed by pseudonymous founders Chef Nomi and 0xMaki. It was launched by SushiSwap in August 2020, as a clone of the already successful DeFi platform, Uniswap.

Launching projects on an open-source code has been a tradition in the crypto industry since Bitcoin, enabling other new projects to copy the code. SushiSwap is a hard fork of Uniswap, the first DeFi protocol. However, the project made sure that some of its fundamentals are unique and advanced than Uniswap.

SushiSwap is one of the  DEXs, with over $120.11 million TVL, according to DeFiLama, as of  June 2025. The fact that the platform supports 28 blockchains, with the introduction of SushiXSwap is not only noteworthy, but also makes it a diverse platform. Some of its supported blockchain networks include Ethereum, BSC, Polygon, Arbitrum, Optimism, Avalanche, Fantom, Harmony, and more. This has boosted its position as a multi-chain DEX, increasing flexibility for users to manage their assets.

How Does SushiSwap Work?

SushiSwap is a decentralized exchange protocol that enables buying and selling of crypto tokens. As we mentioned in the previous section, SushiSwap works based on the automated market-making system. This system eliminates the need for traditional order books and relies on liquidity pools, in which liquidity providers lock their funds using smart contracts to simplify the trading process for users.

Anyone can become a liquidity provider (LP) on SushiSwap by depositing and locking a pair of crypto tokens in liquidity pools. In exchange for providing liquidity, LPs are rewarded with SUSHI tokens in proportion to their contribution. SUSHI is the native cryptocurrency of SushiSwap, which has several use cases within the ecosystem.

Since this DeFi platform works based on Ethereum, SUSHI tokens follow the ERC-20 token standard. SUSHI token also works as a governance token, allowing token holders to vote on proposals and take part in its future development. Additionally, SUSHI token holders can also benefit from discounts on trading fees while using the SushiSwap platform.

Over the years, the SushiSwap ecosystem has grown with new projects and use cases. SushiSwap decentralized exchange is the central aspect of its ecosystem. The platform also launched a non-fungible token project called “Shoyu” in 2021 to solve the issues of existing NFT marketplaces. However, it didn’t gain much traction from the users.

Additionally, “Kashi” is the lending and borrowing product of the SushiSwap ecosystem and also facilitates other features like leverage trading. Finally, “Sushibar” allows users to stake their SUSHI tokens and earn staking rewards in exchange.

How to Provide Liquidity on SushiSwap?

It is a must to have a crypto wallet before involving in any activity related to cryptocurrencies. You can access SushiSwap platform with reputed hot crypto wallets like Trust Wallet, MetaMask wallet, Coinbase wallet, etc. If you don’t have a crypto wallet yet, you must set up one to connect it to SushiSwap and access its features.

Liquidity pool providers (LPs) deposit tokens on liquidity pools to enable easy buying and selling of crypto tokens. Let us say, you would like to provide liquidity to SushiSwap. SUSHI-ETH is the most common trading pair of liquidity pools on SushiSwap. After connecting your crypto wallet to SushiSwap, you need to go to the liquidity section and click on “New Position”. Then, select an equal amount of SUSHI and ETH tokens and click on “Confirm Adding Liquidity”.

You will now receive LP tokens for depositing your funds on SushiSwap. If you would like to receive rewards, you need to exchange your LP tokens to get your original funds along with rewards. A portion of the trading fees will be rewarded to you based on your SUSHI-ETH contribution. Apart from liquidity providing, you can also participate in yield farming and staking to earn more rewards on SushiSwap.

How is SushiSwap Different from Uniswap?

SushiSwap is one of the best Uniswap alternatives, improving upon the original Defi protocol’s limitations. Even though it was created based on Uniswap’s code, it ensured its novelty with an advanced reward system and use cases. SushiSwap’s revenue sharing model includes distribution of trading fees to users as rewards.

Even though both the platforms have liquidity pools and offer rewards for liquidity providing, SushiSwap further allows users to stake their LP tokens and earn rewards. Additionally, the SushiSwap ecosystem has more products and features such as lending, borrowing, margin trading, etc. While the role of Uniswap is remarkable in the entire DeFi system development, SushiSwap is more diverse with more supported blockchains and additional features.

SushiSwap’s Historical Challenges

SushiSwap faced significant hurdles early on:

• Chef Nomi’s Exit (2020): The pseudonymous founder sold $14 million in SUSHI tokens, causing a 75% price crash and accusations of an exit scam. Community backlash forced Chef Nomi to return the funds, and control was transferred to a multi-sig wallet managed by trusted DeFi figures like Sam Bankman-Fried and Robert Leshner.
• Scavenger Attack (2021): A low-liquidity pool exploit allowed an attacker to siphon 81.68 ETH in fees. The issue was contained, and SushiSwap patched the loophole.
• SEC Subpoena (2023): The U.S. SEC investigated SushiSwap, leading to a proposed Legal Defense Fund. This raised concerns but did not derail the platform’s operations.
• Exploit (2023): A security breach led to losses exceeding $3.3 million for at least one user, highlighting the dangers of DeFi platforms. Nevertheless, SushiSwap has since tightened its security protocol.

Despite these challenges, SushiSwap continues to expand.

Is SushiSwap a Good Investment in 2025?

Whether SushiSwap is a good investment depends on a few things: 

• Use cases and its features: SushiSwap works on many chains, lets you farm yields, stake tokens, and has new projects like Dojo and Katana. This makes it a flexible DeFi platform. Its connection to Rootstock and improvements to its aggregator boost its attractiveness.
• Market performance: SUSHI’s price has shown ups and downs, but might grow by June 2025. SUSHI jumped 85% to a $647 million market cap in December 2024 after key announcements. Numbers show a 3,733% return from its $0.60 start price to its $23 peak in March 2021, though it now trades much lower. Recent chart studies hint SUSHI could break through resistance, maybe hitting $1 or more if buyers keep pushing.
• Risks: DeFi platforms come with dangers like uneven losses, weak smart contracts, and government oversight. The 2023 hack and SEC letter show ongoing problems. Investors need to study hard and be careful.
• Tokenomics: The maximum supply of SUSHI is 250 million tokens. While this caps potential dilution, market conditions and adoption rates will influence price stability.

With its strong set of features and new ideas, SushiSwap still draws in DeFi fans who don’t mind managing their own wallets and risks. But investors should keep an eye on market trends and what’s happening with the platform.