Let’s investigate the Uniswap vs. In this thorough contrast, SushiSwap. Let’s begin to comprehend the differences between Uniswap and Sushiswap.
Understanding Decentralized Exchanges
It’s crucial to comprehend what they are before moving on to the differences between Uniswap and SushiSwap. The first concept about these platforms that must be established is that they are decentralized exchanges. The question of which of these two DeFi platforms is superior, however, is a constant concern for crypto enthusiasts.
Despite the possibility that comparing the two DEXs could yield a useful conclusion, it is crucial to comprehend each platform first. In order to establish the ideal framework for setting Uniswap apart from other DEXs, let’s start with an overview of the platform. Similar to that, the discussion would provide an overview of SushiSwap in order to create the ideal environment for contrasting two well-known DeFi platforms.
Read More: Crypto Compare Guide 2023 – Exchanges, Wallets, Tokens & More
What is Uniswap?
The Ethereum blockchain is the platform used by Uniswap, a well-known decentralized cryptocurrency exchange. In contrast to the majority of exchanges designed to impose trading fees, Uniswap serves the general welfare. This is a great tool for users to quickly exchange tokens without having to pay platform fees or deal with brokers.
2018 saw the development of the Uniswap medium using the Ethereum blockchain. By market capitalization, this cryptocurrency project has grown to be the second-largest in the entire world. They are ensuring that it works with all ERC-20 tokens and online wallets like MetaMask and MyEtherWallet. Furthermore, Uniswap is entirely open-source, allowing anyone to copy the code and build their own decentralized exchange. Users can now list free tokens on the exchange thanks to this. This is a significant difference from regular centralized exchanges that are profit-driven and charge a hefty fee to trade in a list of new coins.
Trading in Uniswap Tokens (UNI) enables cryptocurrency owners to take part in the management of this financial protocol as they begin to investigate the world of decentralized finance. Blockchain technology is used by Ethereum to conduct financial transactions decentralized from central financial intermediaries like exchanges or centralized online wallets.
How Does Uniswap Work?
Uniswap does not use an order book and does not adhere to the conventional engineering of advanced trading. The constant product, market maker, is used. The Automated Market Maker (AMM) prototype is a variation of this strategy. Smart contracts called AMMs store liquidity pools or reserves that traders can exchange. Liquidity Providers (LPs) provide funding for these pools.
Anyone can become a liquidity provider by lending the same quantity of two tokens to the pool. The merchant pool is consequently required to pay some taxes. Depending on their pool share, the tax is then transferred to the liquidity providers. Both two ERC-20 and one ETH token may be used as these tokens. Typically, stable coins like USDC, DAI, or USDT make up this pool. According to their investment in the pool, LPs may reclaim this liquidity token. According to their investment in the pool, LPs may reclaim this liquidity token.
What Makes Uniswap Special?
By addressing the liquidity problem, the open source, decentralized platform (DEX) Uniswap has grown to become the fourth-largest platform for decentralized finance (DeFi).
By utilizing the automated liquidity protocol, which encourages traders to become Liquidity Providers (LP) in exchange for tokens that represent their contributions, Uniswap addresses the liquidity issue. All trades made on the platform may be executed using the fund that was created when these LPs combined their financial resources. Users can sell right away because of the consolidated fund’s availability. The token’s value is computed mathematically and can be converted into cash using the trading fees fund. Given that Uniswap charges 0.30% in trading fees per transaction, which are then added to the liquidity reserve, both the LPs and the other Uniswap users benefit from this arrangement.
Uniswap offers a more seamless exchange process than Sushiswap.
What Are the Advantages of Uniswap?
Due to the numerous features that appeal to customers all over the world, Uniswap is well-known. Take a look at them:
Low Transaction Fee:
The transaction fee for Uniswap is just 0.30%. Compared to most decentralized exchanges, it is significantly more affordable. Has it been mentioned that it could eventually be lowered to 0.25%?
Does not mandate KYC (Identity Check):
The KYC procedure is not necessary. This allows you to trade on the exchange quickly and ensures that, in the event that the exchange is hacked, the data will not fall into the wrong hands.
Self-management of assets:
Your financial situation is entirely under your control. By doing this, you can avoid the dangers of decentralized exchanges, where it’s possible to lose money if the exchange is compromised or goes out of business.
Opportunities to Access New Coins/Tokens:
Few cryptocurrency schemes will need to go through a moderation procedure with the listed coin/token exchange, which is something you frequently see in centralized exchanges.
What is Sushiswap?
Sushi is the Sushi Swap’s original token. This ERC-20 token was given out to liquidity providers on Sushi Swap via liquidity mining. The most SUSHI tokens that can be purchased is 250 million. The supply of sushi is determined by block rate. By November 2021, it will be produced at a rate of 100 tokens per block, and its current supply has already reached roughly 50% of the total 127 million token supply.
How Does Sushi Swap Work?
Sushi Swap, like Uniswap, is based on an Automated Market Maker (AMM) system that executes transactions using the aforementioned smart contracts. Through the liquidity pool, other users provide tokens. In token pairs, other Sushi Swap users lock their money into this pool, providing the necessary sums to complete the swap. Then, through a procedure known as income farming, those users receive a small portion of the revenue produced by the trade.
In addition to Token Swaps, Sushi Swap also provides other Defi features, such as the ability to participate in credit services, add SUSHI coins and rewards to the network, and purchase newly-offered Token Defi startups through its MISO service.
What’s Special About Sushi Swap?
Sushi Swap has undergone significant changes to set it apart from its inspiration, despite using Uniswap’s codebase as its foundation. A different invention, the SUSHI token, eventually inspired Uniswap to follow suit, giving users more resources to earn rewards and paving the way for the DEX of the future.
Sushi Swap is a decentralized community focused on practices that go beyond DEX, in contrast to Uniswap, which has raised venture capital funding and is a core, centralized development team.
What Are the Advantages of SushiSwap?
SushiSwap is a hard fork of Uniswap that maintains the original look of its parent while adding community-focused features. Unfortunately, the protocol is intended to milk the financial resources of its parent rather than changing course.
It took fish from Uniswap worth $250 million on its first day of operation. Almost 80% of the liquidity was acquired three days later.
The ecosystem operates in two stages. During the first stage, traders accept SUSHI in exchange for Uniswap’s liquidity pool tokens. The stake tokens are then transferred by traders and used on the DEX for SushiSwap.
More incentives for liquidity providers
Liquidity providers on Uniswap receive revenue from network-generated trading fees. Smaller cryptocurrency exchanges, mining pools, and other wealthy providers run the risk of eclipsing smaller liquidity providers.
However, its spinoff improves it by offering more incentives. SUSHI tokens are used in this instance to reward the liquidity providers. Even after they have provided liquidity, providers still receive a portion of the fees made by the trade.
An elaborate reward system
The original chain and the fork both distribute the same trading fees, but they do so in different ways. Each provider on Uniswap receives a share of 0.3 percent of the liquidity in a pool.
Contrarily, a ratio of 0.25 percent of the trading fees from the pool was distributed to liquidity providers as sushi. A further 0.5% is converted into SUSHI and distributed to token holders.
Approval for security audits
Although the plan is new, it seems to accomplish several noteworthy things. It offers security audits, for instance, and suggests keeping 10% of each token distribution for future development.
Similarities Between Uniswap and SushiSwap
You can proceed to the SushiSwap vs. Uniswap comparison once you have a clear understanding of the two well-known decentralized exchanges in question. But in order to avoid any confusion when comparing the two platforms, it’s crucial to look at their similarities. The use of AMMs, or automated market makers, is the first point of similarity between the two decentralized exchanges. These exchanges use the AMM model to make trades, as opposed to the conventional order book model. Therefore, users don’t need to wait for a third party to execute trades or exchange their crypto assets.
The use of liquidity pools is a significant area where Uniswap and its rival differ from each other. Both of the decentralized exchanges have liquidity pools with tokens from two different cryptocurrencies built into their designs. Users have the choice to change one token for another in the liquidity pool in exchange for a set fee. Users can also become liquidity providers on SushiSwap or a rival website to receive rewards for making contributions to liquidity pools.
Uniswap Vs. Sushiswap: a Detailed Comparison
Does the name Uniswap & SushiSwap ring a bell? That is due to the fact that both protocols support the same code. SushiSwap is merely a fork of the Uniswap exchange with a few code changes made.
As time went on, new features and concepts were added to each platform. Currently, the variations between Uniswap and SushiSwap include:
Swap Fees
With three fee tiers of 0.05%, 0.3%, and 1%, Uniswap offers three pricing options. The fee tiers show the amount of risk that liquidity providers are willing to demand in accordance with the anticipated volatility of their pools. Stablecoin pairs, for instance, might charge a fee of 0.05%; popular pairs, like ETH/USDT, might accept a fee of 0.3%; and pairs with more recent tokens might levy a fee of 1%. The costs are proportionally distributed among all active liquidity providers by the Uniswap protocol. While holders of dish tokens receive 0.05% and liquidity providers receive 0.25% from SushiSwap, the latter charges a flat 0.3% fee for all business teams.
Liquidity Mining
As was previously mentioned, as a reward for providing liquidity, Uniswap once gave some of its UNI tokens away through liquidity mining. The platform terminated the liquidity mining program someday after it was launched as intended because it was a temporary program. Since this initial token distribution, users had no other way to earn new UNI tokens until the Uniswap grants program. The founder of Uniswap, Hayden Adams, promised that liquidity mining would return to the platform soon, but first Uniswap needs to announce a political candidate date. In contrast, SushiSwap’s liquidity mining is still active. By staking them in pools to create liquidity, liquidity providers can earn dish governance tokens indefinitely.
Concentrated Liquidity
Uniswap introduced a theory known as “concentrated liquidity,” where liquidity suppliers will concentrate their tokens inside custom value ranges. Liquidity suppliers subsequently offer more substantial liquidity at a specific price range, creating unique price curves. Users can create bigger swaps due to the incredibly high liquidity at the anticipated price range of a particular commercialism pair. This feature is not available on SushiSwap, and the company has not stated that it has any plans to add it.
Lending and Margin Trading
By offering options, especially to DEXs, Uniswap focuses solely on its role as a DEX. SushiSwap, however, is growing into additional Defi sectors. The platform presents “BentoBox,” a token locker for decentralized applications (Kashi, a platform for lending and margin mercantilism, is the only DApp that The BentoBox currently offers. After users place tokens in the vault, the BentoBox stores them there like cash, whereas Kashi uses them for lending, borrowing, and margin trading.
Reward System for Latest Tokens
The most recent tokens launched on Uniswap’s platform do not receive any additional rewards. In contrast, SushiSwap has a characteristic known as the “Onsen Program, ” a liquidity provision network for new tokens. By providing additional SUSHI rewards to speakers of these newer tokens, the platform supports more recent and smaller projects via the Onsen system. Users are encouraged to acquire these tokens for staking goals by the added rewards, which encourages project growth.
Total Value Locked
The total amount of assets locked in DeFi smart contracts is referred to as the Total Value Locked, or TVL. It can give users a crystal-clear picture of the value of a platform. SushiSwap, in an interesting turn of events, was able to take the lead in TVL at the time of its launch. The UNI token, on the other hand, was a response from Uniswap to its rival’s TVL strategy. As of July 2021, Uniswap had a TVL of $4 billion while its rival had a TVL of $3.4 billion.
Trade Volume
Another significant point of distinction between Uniswap and SushiSwap is the trade volume. The sum of all trades made on a particular platform is essentially represented by trade volume. It works as a superb metric for highlighting a platform’s development and success. Uniswap’s weekly trade volume is currently close to $7.7 billion. SushiSwap’s weekly trade volume, which is only about $1 billion, is 700% less when compared to this.
Final Thoughts
Numerous advantageous opportunities for enhancing the DeFi landscape are presented by the development of decentralized exchanges like Uniswap. When there are alternatives like SushiSwap, it is premature to assume that one decentralized exchange is the best option. A clear reflection of DeFi’s long-term state can be seen in the comparison of the two decentralized exchange platforms.
When Uniswap and SushiSwap are compared, it becomes clear that both decentralized exchanges offer fresh opportunities for leveraging DeFi. With more benefits, better opportunities for mining liquidity, lending, and margin trading, SushiSwap provides a sufficient amount of adoption potential. The fact that Uniswap has a higher TVL and trade volume, however, demonstrates the users’ confidence in the platform.
