Uniswap and SushiSwap have grown into two of the leading decentralized exchanges (DEXs) leading the current DeFi bull run higher.
Despite a controversial start for SushiSwap, SushiSwap has caught up with Uniswap over the past few months in terms of activity on the platform, total banned value and the price of its SUSHI governance token.
A recent report from Delphi Digital took a closer look at the two projects, breaking down the fundamental differences in the way each project has evolved since SushiSwap’s vampire attack on Uniswap.
SUSHI vs. UNI price. Source: TheTIE
SushiSwap was originally developed as a fork of Uniswap v2 with the SUSHI governance token that was distributed to community participants.
At this point, Uniswap had not yet launched the UNI token, which was subsequently sent to users who had interacted with the protocol either by trading or by providing liquidity.
While UNI’s release was likely planned at some point, many saw the surprise drop of air as an attempt to stop a possible vampire attack that would drain Uniswap’s liquidity to SushiSwap.
After a bumpy start, during which SushiSwap co-founder boss Nomi launched all of his SUSHI tokens for Ether (ETH) worth 14 million US dollars, in order to later return these funds to the state treasury, SushiSwap co-founder ‘0xMaki’ took over ‘as a project manager and helped him correct the course and become a viable competitor among the DeFi platforms.
Total value blocked on sushi swap. Source: Defi Llama
Comparing the original token distribution, 65% of the original UNI offering was distributed to the community through liquidity mining and a government-controlled treasury, versus 80% of all SUSHI tokens.
In this regard, the SushiSwap platform has grown into a more community-controlled project that is self-funding and emits 9% of all SUSHI from the treasury system. In contrast, Uniswap has received some VC support, with a total of $ 12 million from various sources raised to fund future development.
SushiSwap is more decentralized than Uniswap
Differences in the development path began shortly after the fork and resulted in two different platforms that offered different experiences. The excitement surrounding the Uniswap v3 release continues to grow, even though only a handful of insiders know exactly what the new version will mean.
While users and token holders trust the leading developers who have created an incredible user interface so far, many in the cryptocurrency space prefer a project with more transparency and community participation.
SushiSwap is sticking more to the cryptocurrency community ethos in this way, with a core team of developers being more transparent about what’s coming and where the project will lead in the future.
SushiSwap has also put in place an effective governance system that allows community members to have a say in important decisions. The governance system for Uniswap is less conducive to community engagement, which could be the result of the rush to release the UNI token and a desire to lay a solid foundation prior to integrating community governance.
Divergence in value proposition and community engagement
In the last few months the Uniswap team has focused on building version 3. As Delphi Digital pointed out, Uniswap’s first mover advantage has brought a plethora of integrations to the platform as projects across the industry have sought the platform for the liquidity it provided.
SushiSwap, on the other hand, has been busy making connections with other burgeoning DeFi platforms, particularly the yEarn ecosystem which includes yEarn, Cream, Pickle, Cover, and Alpha. This will help make greater use of SushiSwap’s liquidity offerings and make the platform more resilient to upcoming challenges.
Liquidity of the SushiSwap vs. Uniswap pool. Source: Dune Analytics
More recently, SushiSwap has begun to incentivize liquidity for longer-term assets in order to establish itself as a place to access projects with long-term profitability. In contrast, Uniswap was a way for new projects to get a head start in terms of liquidity and community engagement.
One of the main differences between the two platforms concerns the generation of cash flows.
In March 2021, the UNI community will be able to redirect 0.05% of all fees on the platform to the Uniswap treasury managed by the UNI token. The fees are incurred in the Treasury and the holders of UNI tokens can vote on what to do with these funds in the future.
SushiSwap has introduced the 0.05% fee since its inception in September 2020, and the governing council agreed that the money generated will be used to buy SUSHI directly and give it to stakers, which is a direct source of income.
For the time being, Uniswap is clearly in the lead in terms of fees generated. With a greater number of trading pairs available and huge liquidity pools for top coins, the Uniswap platform has higher volume, which translates into higher cash flow for liquidity pools and UNI token holders.
Uniswap vs SushiSwap volume. Source: TheTIE
However, since the fees go not directly to the token holders but to a treasury, UNI is more attractive to investors with longer-term prospects who prefer the approach of “accumulating capital in the treasury in the early years”.
Hence, SushiSwap is offering a more community-oriented and regulated system that provides token holders with direct revenue from fees generated on the platform, while Uniswap is working on a long-term plan to create a one-stop DEX that will meet the needs of all traders.
The first mover advantage and dominant liquidity pools have allowed Uniswap to compete with companies like Coinbase in terms of trading volume, and longtime advocates of cryptocurrency appreciate this feat.
Weekly DEX Volume. Source: Dune Analytics
SushiSwap rose from the ashes to create a community-driven project that those dealing with crypto will appreciate for its ability to generate instant income.
SUSHI recently saw a surge in trading volume on Uniswap, showing that the battle for the title of top DEX is only just beginning in these early rounds of the crypto-bull cycle.
SUSHI tape on uniswap. Source: Glassnode
The DeFi sector is just beginning to gain the attention of the traditional financial sector and as the liquidity, total value and price of the governance token of each platform hit new highs for both Uniswap and SushiSwap it will be interesting to watch the two compare Platforms further differentiate in development.
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