Sashimi, DEX, and the future of various types of Swaps?

(The Ladies of Arles, Vincent van Gogh)

Yesterday, Uniswap's liquidity dropped by more than 70%, returning to a similar scale before the birth of SushiSwap, which was less than $500 million, while SushiSwap "leveraged" more than $1 billion in liquidity. In other words, after the liquidity migration, SushiSwap's liquidity is more than twice that of Uniswap.

(Uniswap’s liquidity dropped by 70% yesterday)

(Yesterday, SushiSwap’s liquidity was more than 2 times that of Uniswap)

SushiSwap’s Genius Fork

No matter how people view SushiSwap, it is a classic battle in the history of cryptocurrencies. In essence, SushiSwap did not leverage much liquidity on Uniswap, because the liquidity of Uniswap before and after the birth of SushiSwap was almost the same, and SushiSwap took away the liquidity that originally belonged to it.

(Judging from the Uniswap liquidity before and after the birth of SushiSwap, it is just taking back its own liquidity)

However, SushiSwap’s gameplay based on Uniswap is very innovative, because it is not just a simple fork, but a token distribution mechanism (partially based on YFI), and most importantly, the distribution of SUSHI tokens based on Uniswap’s liquidity pool equity tokens, which solves the subsequent liquidity problem for it. In other words, from the beginning, SushiSwap does not have to worry too much about the chicken or the egg problem, because with Uniswap as the old hen, SushiSwap does not have to worry about the problem of no eggs, but only the problem of how many eggs there are.

This gameplay seems very simple in retrospect and does not require much technical content, but it combines these mechanisms and gameplay together to detonate the crypto community, and it fully hits the excitement point of the community.

Uniswap's liquidity has risen again. Is it a capital repatriation?

(Uniswap's liquidity once again climbed over $1 billion)

After Uniswap's liquidity fell to less than $500 million yesterday, today Uniswap's liquidity has climbed back to over $1 billion. What's going on? Is SushiSwap's liquidity flowing back again? No.

Blue Fox Notes found that the liquidity of SushiSwap remained at a level not much different from the original (slightly down). So where did the new liquidity of about $500 million come from? It turned out that SashimiSwap (Sashimi) came.

Sashimi not only brings new liquidity mining, but also brings new inspiration to other public chains and projects. If other public chains or projects use it properly, then these projects are likely to join the battle. However, the effect of joining the battle will definitely decrease gradually.

What is SashimiSwap?

SashimiSwap is essentially the same as SushiSwap. It is also a DEX in the AMM mode and a fork of Uniswap, but it is not a fork of SushiSwap, and the two will not share liquidity.

In terms of mechanism, SashimiSwap copied SushiSwap. Users can mine SASHIMI tokens by staking the LP tokens of 11 liquidity pools on Uniswap. At the same time, the incentive mechanism it adopts is the same. In the first 100,000 blocks (from block height 10,833,000 to 10,933,000), it will reward users who stake 11 Uniswap liquidity pool LP tokens with 1,000 SASHIMI tokens per block. After the first 100,000 blocks, the reward for each block will drop sharply to 100 SASHIMI. This token incentive mechanism is the same as SushiSwap, which adopts a high-profile model, trying to quickly increase the overall liquidity through high-return stimulation in the short term.

In addition to the same mechanism as SushiSwap, SashimiSwap is different in that it does not have a 10% token allocation share for the developer team. In SushiSwap, 10% of the founder's share is used for development and auditing, etc., which comes directly from the SUSHI token distribution. SasimiSwap's developer share does not come directly from the newly added token allocation, but from 0.05% of the 0.3% transaction fee, and the remaining 0.25% of the fee is rewarded to users who provide liquidity. 0.05% of the fee will be sent to the SASHIMI DAO contract.

The Implications of SashimiSwap

If many projects want to rejuvenate, it is very important to find a trigger point for demand. One of the current trigger points for demand is the high returns of liquidity mining. (Of course, this is a short-term stimulus, and long-term development requires a combination of long-term and short-term)

SashimiSwap was initiated by Aelf, and it will be integrated with AESwap on its own blockchain in the future. From this perspective, Aelf was originally going to release its AESwap, and through SashimiSwap, it can kill two birds with one stone.

* Paving the way for the development of AESwap

AESwap was originally a DeFi ecological project that Aelf wanted to promote. If it had not copied the gameplay of SushiSwap, it would have taken more time, energy and cost to attract people's attention. But now, it just copied the model of SushiSwap and removed the developer token share from the liquidity mining allocation. This move immediately caused a reaction in the market.

* Increase the demand for Aelf public chain tokens

From yesterday to now, the price of Aelf's public chain has more than doubled, and its core driving force comes from the impact of liquidity mining in SashimiSwap. On Uniswap, there are 11 mining token pools, and there are 2 token pools, one is the SASHIMI/ELF token pool, and the other is the ETH/ELF token pool. In order to enter these two high-yield token pools for liquidity mining, users need to buy ELF of the same value as ETH to provide liquidity on Uniswap, resulting in an increase in demand for ELF. Of course, this is also the main driving force behind the rise in Uniswap liquidity.

From this perspective, it has brought new insights to other public chains and projects. That is, by borrowing the SushiSwap model, it ultimately serves the development of its own ecosystem or project, especially in stimulating liquidity in the short term and completing the initial cold start. From the current perspective, this move is effective in the short term.

Of course, this gameplay is not without side effects. If too many public chains or project parties frequently adopt this gameplay, it will be like drying up the pond to catch fish. Too frequent liquidity mining itself does not produce long-term value. The traders in the market will pay for this gameplay in the end, and the beneficiaries are the early-starting project parties, the earliest whales to participate in liquidity mining, and the miners on public chains such as Ethereum. As more people participate, the handling fees become more expensive (today's Ethereum handling fees have far exceeded those on Bitcoin, and its total daily flow value has also exceeded that of Bitcoin, and the main reason for this is liquidity mining). In the short term, it is essentially a zero-sum game. If traders and liquidity providers cannot be settled in the end, this is a game of little long-term value, and it may end up in a mess. For ordinary users, it may not be suitable for participation, and risks need to be controlled.

At the same time, this approach will also have a diminishing returns, because as people who provide liquidity discover that not everyone can make money in the market, people’s enthusiasm will wane, and eventually return to a relatively rational mean return.