SushiSwap Head Proposes new Tokenomics to Boost Liquidity

Parth DubeyVerified Author

January 2, 2023 at 04:18 UTC (4 minutes ago)

  • Decentralized exchange SushiSwap’s CEO Jared Grey proposed a new tokenomics to boost decentralization and liquidity.
  • Grey introduced a token-burning mechanism and a liquidity lock for price support on the community forum.
  • LPs would receive 0.05% of swap fees revenue while the higher volume pools would receive the bulk of the rewards.
  • Staked SUSHI (xSUSHI) will not be eligible for any of the fee revenue but will only receive emission-based rewards.

The liquidity crises on centralized crypto exchanges is of great concern for investors, but decentralized exchanges are also facing similar troubles due to a huge collapse in general interest in DEXs. Interestingly, to boost the liquidity of his platform, CEO of SushiSwap (SUSHI), a decentralized crypto exchange, Jared Grey, has proposed a new tokenomics.

According to a proposal introduced on the SushiSwap forum on December 30, a new tokenomics model could be implemented that brings time-lock tiers to emission-based rewards. Furthermore, Grey also introduced a token-burning mechanism and a liquidity lock for price support.

As per Grey’s proposal, “an optimal token model should incentivize liquidity and promote decentralization. In addition, it should provide more equitable governance and sustainable economics.”

“We propose a new token model that will help Sushi achieve these goals and, in addition, help bolster Treasury reserves to ensure continual operation and development. The proposed token model is robust and offers several tried and true methods for promoting value and utility. In addition, we institute novel concepts to help promote maximum value for all stakeholders,” the proposal read. 

The proposal confirms that the Liquidity Providers (LPs) would receive 0.05% of swap fee revenue, while the higher volume pools would receive the bulk of the rewards. These LPs can also lock their liquidity so that they can “earn boosted, emissions-based rewards.” However, if removed before maturity, they lose the rewards as they will be burned. 

Staked SUSHI (xSUSHI) will not be eligible for any of the fee revenue but will only receive emission-based rewards. Additionally, time-lock tiers will be used to determine the emission-based rewards, and the longer time locks will result in bigger rewards. Also, in the event of premature withdrawals, the rewards will be forfeited and burned. 

Interestingly, SushiSwap will “use a variable percentage of the 0.05% swap fee to buy back Sushi and burn it.” This percentage will be based on the total time-lock tiers selected. Moreover, the DEX has also proposed a nominal 1-3% APY for emissions.

“Because time locks get paid after maturity, but burns happen in ‘real-time’ when a large amount of collateral gets unstaked before maturity, it has a sizable deflationary effect on supply,” states the proposal.

Parth Dubey

Parth Dubey Verified Author

A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.

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  • William Foster

    William Foster is a editor for the Central Asian and European region. Before he worked as an editor at Acuris (Mergermarket) where he was responsible for documents on startups, private equity deals, fundraising, developments and editorial direction. His most memorable time was at Reuters, where he was both a reporter and editor for various teams.

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