Complete Beginner's Guide to SushiSwap: Everything You Need to Know About This Veteran DeFi Exchange

Have you heard of SushiSwap? If you’re in the crypto space and don’t know about this DEX, it’s a bit awkward. Today, let’s break down what this long-standing decentralized exchange is all about.

What is it?

SushiSwap is a decentralized exchange built on Ethereum, launched in August 2020, with the original intention to fork Uniswap. But now, it has developed its own unique features. The core mechanism is AMM (Automated Market Maker), which simply means: instead of trading directly with another person, you trade with a liquidity pool.

As of April 2024, SushiSwap has a TVL (Total Value Locked) of over $422 million across 35 chains, ranking 56th in the entire DeFi ecosystem. Sounds impressive, but keep in mind its peak TVL reached $8 billion. What does this current number mean? Competition is fierce, but it’s still very much alive.

How do you make money?

Providing Liquidity

Deposit two tokens of equal value into a pool and you’ll get a share of every transaction fee. Your earnings depend on your proportion in the pool. Sounds simple, but there’s risk—when token prices fluctuate, you can face “impermanent loss.”

Yield Farming

Take your SLP tokens (liquidity provider receipts) to participate in farming and earn SUSHI rewards. Different farms have different yields; some can offer sky-high APYs, but the risks are just as high.

Staking SUSHI

Stake SUSHI to get xSUSHI, which lets you share in platform fees and vote in governance. This is usually for the most active players in the ecosystem.

Kashi Lending

Borrow and lend tokens on SushiSwap to earn interest. Each pair operates independently, so risks are more controllable.

MISO Launchpad

Participate in new project token launches for a shot at early profits.

Key pitfalls for long-term holders

Slippage

Trading illiquid tokens can cause the price to spike or crash. This problem is especially prominent during high trading volumes.

Sky-high Gas Fees

Any operation on Ethereum mainnet requires paying gas fees. When the network is congested, the fees can be astronomical.

Impermanent Loss

This is a must-know for LPs. Put simply: the more the token price fluctuates, the higher your losses. The formula X×Y=K means when one token drops, the pool will automatically adjust the other token’s price to maintain this product. The result: you might be forced to sell a token at a high price.

Contract Risk

There’s always the risk of smart contract vulnerabilities. Historically, DeFi has been hacked numerous times.

SushiSwap vs Uniswap: Who’s better?

Data Comparison

• SushiSwap TVL: $422 million
• Uniswap TVL: $6.3 billion

Uniswap is clearly dominant.

Feature Comparison

Uniswap follows a “minimalist” approach—just trading. SushiSwap is about the “ecosystem”—trading, lending, farming, governance, the full package. If you’re just here to trade, use Uniswap; if you want to earn in multiple ways, choose SushiSwap.

Governance Comparison

SushiSwap has a stronger community governance vibe. SUSHI holders can vote on the ecosystem’s direction. Uniswap’s UNI also has governance rights, but participation isn’t as high.

How to get started?

Step 1: Install a wallet (MetaMask or Trust Wallet are both fine)

Step 2: Get some ETH (for gas fees)

Step 3: Go to the SushiSwap website and connect your wallet

Step 4: Choose a token pair, enter the amount, confirm the transaction

That’s it. But remember, every step requires gas fees, so small transactions might not be cost effective.

Summary

SushiSwap is a major player in the DeFi ecosystem. Although TVL has pulled back from its highs, the ecosystem is still evolving and features are being improved. If you want to earn extra in DeFi, SushiSwap is worth looking into. But remember, AMM trading carries risks, farming returns aren’t guaranteed—do your homework before jumping in.