SushiSwap investors got a raw deal over the weekend when the founder of the $1.27 billion DeFi protocol cashed out. But exactly what happened with Sushiswap and its functioning? Let’s try and find out in our altcoin news today.
Launched as a fork of Uniswap, sushiswap is the project of the anonymous founder Chef Nomi who took the former project one step further and added rewards for providing liquidity to the exchange via a liquidity provider token named SUSHI. This token earns a portion of the AMM revenue so the AMMs provide infrastructure to match the traded tokens with liquidity. The variant of other decentralized experiments, saw Uniswap growing to be the biggest AMM with volumes almost reaching the ones of Coinbase Pro.
The latest episode underscores the complexity and unpredictability of the hot DeFi space where more than $8 billion worth of crypto is now locked up in smart contracts according to Defi pulse. The Sushi investors, however, discovered what happened to SushiSwap on Saturday after putting money into an unaudited contract controlled by an unknown person. Chef Nomi sold his share of LP tokens, actually swapping them for 37,400 ETH worth about $13 million in what bears believed to be an “exit scam.”
The token fell 73% in price and dropped from $4.44 to $1.20 in the past 18 hours according to CoinGecko. The token is now trading hands at $3.16 as of publishing time. 11 days later, the $1.27 billion is locked in Sushi contracts which is equivalent to 77% of the Uniswap tradable assets. The transcendence to Defi unicorn was made possible over innovative leaching of the rival Uniswap. Chef Nomi bootstrapped SushiSwap and took advantage of Uniswap’s popularity within the DeFi circles.
SushiSwap gave extra LP tokens for users that provide liquidity to the ETH sushi pool on Uniswap in a technique that is called “Zombie Mining.” The LP rewards were ten times higher than they would normally be in a certain time which created a mad rush to earn these tokens through farming sushi on Uniswap as shown by the exponential rise in volume over the past week. Chef Nomi then became a multi-millionaire by copying and pasting Uniswap’s code. The founder declared his intention to stick with his protocol and to work on the code even more.