What is Sushiswap
Sushiswap is a decentralized exchange (DEX) that enables users to swap between tokens without having to rely on the more traditional order book. They are a fork of the first DEX that was launched, Uniswap but proposed several innovations themselves such as yield farming, staking, lending and borrowing, and a decentralized app store.
Sushi solved a problem regarding the active participation of its community by launching its governance token $SUSHI which allowed its users to vote on new features and further grow its value. This allowed it to be the 2nd most active DEX in the DeFi ecosystem just behind Uniswap with a total value locked (TVL) of over $4.5 billion and a market cap of $1.3 billion.
History of Sushiswap
It was not all smooth for the project however due to the infamous Chef Nomi scandal where the anonymous developer removed over $15m ETH from the Sushiswap Treasury without the community knowing. This caused massive distrust among the users and die hard fans of the project.
Things started to pick up for Sushiswap when the leadership was handed over to 0xMaki (another anonymous developer) and Sam-Bankmanfried (CEO of Alameda Research and the centralized exchange behemoth FTX). This was the catalyst that led to an influx of new capital to be invested in the project with the likes of Defiance Capital and Alameda Research pledging its support.
The product
As stated above, what makes Sushi stands out from the other DEXes is its innovative approach in accruing value for its ecosystem. Apart from its decentralized exchange offering which allows using liquidity pools to swap between tokens, Sushiswap also offers:
a) Yield farming: allows users to provide liquidity to earn yield
b) Sushi Bar: stake $SUSHI tokens to earn extra xSUSHI
c) Kashi: this serves as a lending and borrowing protocol
d) Bento Box: a decentralized app store that developers can build projects in
Token Metrics
When analyzing projects, it is important to classify them as productive assets that should be valued based on the cash-flows and revenue they generate. These are what investors look for in projects that have a proof of concept and the ability to scale.
Market Cap
Taking data from Token Terminal, Coin Gecko, and The Block, we see that Sushiswap has a current market cap of $1.3 billion with a TVL of $4.5 billion. This is in comparison with Uniswap which has a market cap of $10.8 billion with a TVL of $4.7 billion.
What makes Sushiswap impressive is despite a huge difference in terms of market cap with Uniswap, the TVL and Volume of Sushiswap is nearly on par with Uniswap.
Price-to-sales (P/S) ratio
Due to a surge in how quickly Sushiswap is growing its revenue in Q2 2021, its price-to-sales ratio fell from a high of about 14 to 3.6. As a result, $SUSHI looks like a bargain buy and can be considered very undervalued.
Volume to Market Cap Ratio
To further analyze how undervalued Sushiswap is, take the trading volume to market cap ratio (VOL/MC), and we see how Sushiswap has 52% compared to the 6.6% for Uniswap. Trading volume is one of the best metric to value crypto as higher volumes translates to more cash flows for the users such as liquidity providers.
Activity and transaction fees
In terms of activity, Sushi is ranked 4th in terms of fees paid by users only behind Ethereum, Uniswap and Bitcoin. This shows that it is a very popular protocol that people are paying to use.
Sushi’s Current Stats
Liquidity wars between DEXes is at an all time high with each trying to gain as much market share as possible. Being multichain is integral to a success of a protocol to reach out to as many users as possible and the high gas fees on Ethereum often prices out retail users. Sushi has since been deployed on Polygon, Solana, Fantom, xdai, and Moon Beam Network.
Conclusion and Final Thoughts
Sushi is one of the most exciting decentralized applications due to its first mover advantage in being a successful DeFi fork which focused on giving out governance tokens as rewards for yield farming (something Uniswap copied down the line). This is coupled with the fact that the protocol has a very clean and easy to use UI/UX and appealing brand in the name of a famous food.
In my opinion, Sushiswap did not only overcome a potential disastrous situation involving its founder, but they have consistently built great products and continue to offer value to its community and users. The resiliency of this project shows the developers are building a better financial ecosystem for the future and not just in it for the money.
