Decentralized exchanges (DEXs) are growing more popular amid the rise of third-party cryptocurrency exchanges. Among the many DEXs piggybacking on Ethereum’s blockchain, SushiSwap and Uniswapare are two of the most prominent. So, what are the differences in these two exchanges? Let’s take a closer look.
What Is SushiSwap?
SushiSwap is a decentralized exchange platform built on the Ethereum blockchain that launched in 2020. It allows users to swap/trade and buy over 300 cryptocurrencies across chains by connecting their cryptocurrency wallets. The platform lets you buy and sell crypto with just one click and offers 24/7 customer support.
SushiSwap began as a hard fork of UniSwap, another decentralized exchange operating on the Ethereum blockchain. Forking happens when there is a change in a blockchain’s protocol, resulting in a split in the blockchain’s software. A hard fork is a change in a blockchain protocol that splits it into two blockchains (the original and the new), requiring all users to upgrade to the new software to participate in the new blockchain.
How Does SushiSwap Work?
SushiSwap works by using an automated market maker (AMM) system and liquidity pools. This means users deposit cryptocurrencies to provide liquidity, and the protocol uses formulas to set crypto prices and calculate exchange rates based on the current ratio of assets in the pool. The AMM system ensures continuous liquidity for crypto trading on SushiSwap’s platform.
SushiSwap is an Ethereum-based token exchange platform that uses the Uniswap protocol. It’s based on the premise of Uniswap but uses tokens to incentivize its suppliers. Along with supporting multiple cryptocurrencies, it has its own native currency known as SUSHI.
There are three main types of ways users can interact with SushiSwap and contribute to the AMM system:
Swappers/Traders
Swappers and traders are those who use SushiSwap to exchange one cryptocurrency for another. Every time a swapper makes a trade, they have to pay a transaction fee.
Liquidity Providers (LPs)
Liquidity providers (LPs) supply assets and liquidity directly to SushiSwap’s liquidity pools, which powers the AMM to facilitate trades. By providing liquidity, LPs earn a portion of trading fees depending on their contribution amount. A remaining portion of the fee also goes to SUSHI holders who have staked tokens to earn xSUSHI.
SUSHI Stakers
SUSHI stakers stake their SUSHI tokens in exchange for xSUSHI. The xSUSHI token represents shares in the Sushi Bar, a yield farming feature on SushiSwap. For every swap on SushiSwap, a portion of the trading fee is locked into the liquidity pool and available to earn for xSUSHI holders.
Features of SushiSwap
Although SushiSwap originally started as a hard fork of Uniswap, it has since enhanced its code to vary greatly from Uniswap.
SushiSwap is driven by community-focused features. It essentially milks Uniswap’s liquidity while keeping its original design. Despite working like Uniswap, SushiSwapSushiswap intends for its platform to look and feel different.
SUSHI tokens are another innovation that inspired Uniswap to follow suit. SushiSwap grants Sushi tokens to users as a reward for generating volume.
SushiSwap’s parent protocol followed a different path than initially intended, eventually acquiring 80 percent of Uniswap’s liquidity by itself.
- In the first phase of the ecosystem’s operation, traders used Uniswap liquidity pool tokens and exchanged them for SUSHI.
- As a next step, traders deposited their stake tokens into their SushiSwap accounts to trade with their decentralized exchanges (DEXs).
Pros and Cons of SushiSwap
Since its fork from Uniswap, SushiSwap has become its own fledged platform, with a handful of benefits and a few drawbacks to show for it.
Pros of SushiSwap
No Mandated KYC Verification
Know Your Customer (KYC) is a standard process that requires new account owners to verify their identities. Unlike most financial institutions, SushiSwap doesn’t require this type of information because it wants to offer a simple peer-to-peer trading experience.
Liquidity-Provider-Focused Incentives
On Uniswap, liquidity providers earn network trading fees by providing liquidity. Smaller traders are at greater risk of surpassing large cryptocurrency exchanges and mining pools as the primary sources of digital asset liquidity.
SushiSwap is different, though. The platform improves upon this model by providing incentives to liquidity providers: They can earn Sushi tokens — which are based on the fees generated by their trade — and use these tokens in exchange for goods or services.
Intricate Rewards System
SushiSwap distributes 0.25 percent of trading fees to liquidity providers. The exchange also converts 0.05 percent into SUSHI and redistributes it among token holders.
Security Audit Approval
SushiSwap has developed a new approach to how exchanges work and manages to address many issues at once. For instance, it routinely conducts security audits to ensure the security of smart contracts and infrastructure.
Cons of SushiSwap
Insubstantial Technology
SushiSwap began as a fork of Uniswap, so its foundational code is built on Uniswap software. It specifically began by using Uniswap version 2.0, a version of Uniswap’s protocol that was licensed to allow other developers to do anything with it (as a GNU General Public License) so SushiSwap developers took advantage. Unfortunately, this means SushiSwap doesn’t have its own steady platform. Although working on Uniswap’s platform seems easier, SushiSwap could’ve done more if the platform had its own protocol to maintain and develop.
Only Supports Ethereum-Based Tokens
Since SushiSwap uses the Ethereum blockchain, it only supports the use of Ether (ETH) and other ERC-20 standard tokens on its platform. This means some popular cryptocurrencies like Bitcoin aren’t supported on SushiSwap.
What Is Uniswap?
Uniswap is a decentralized cryptocurrency exchange based on the Ethereum blockchain that launched in 2018. Users can swap/trade or buy cryptocurrencies across chains or send crypto to others directly through the platform by connecting a crypto wallet. Uniswap supports over 1,300 crypto coins and pairs, making it one of the largest DEXs by volume.
How Does Uniswap Work?
Uniswap uses the Automated Market Maker (AMM) system, which is a smart contract that holds liquidity pools and reserves that dealers use when trading. It also has a native token known as UNI.
Aside from trading, users can provide liquidity and have a choice in different fee tiers when creating a new pool position. Liquidity providers may create liquidity pools, add and remove liquidity or collect fees from pools on Uniswap v2, v3 or v4 protocols.
Features of Uniswap
Since Uniswap uses an AMM system, traders can get paid for putting money into a consolidated fund, which they do by contributing to Uniswap. This fund, in turn, enables more efficient trades. Because there is an active fund that can accept any order regardless of its size, you don’t have to wait for someone to match your price before you can execute your trade.
Pros and Cons of Uniswap
Uniswap offers its users several advantages, though it has a few disadvantages too
Pros of Uniswap
No Mandated KYC Verification
Uniswap doesn’t require Know Your Customer (KYC) verification when directly using the platform, offering an anonymous, peer-to-peer trading experience. However, users who use a third-party to buy crypto on Uniswap are required to go through the KYC process.
Asset Self-Management
With Uniswap, you can handle everything from your wallet. As a result, you’re in control of your funds and can trade them whenever you want without waiting for approval or sending money elsewhere.
Wide Access to New Tokens and Coins
Uniswap is one of the largest and most popular DEXs in operation, with more than 1,000 cryptocurrencies supported on the platform. This gives you a chance to invest in new projects while they’re still growing in popularity. You can also trade with people globally without worrying about borders or regulations.
Cons of Uniswap
On the other hand, Uniswap has some drawbacks that potential users should be aware of.
High Gas Fees
When the Ethereum network is busy, it takes more gas to send a transaction. Gas fees depend on how many other people are sending transactions at the same time. Therefore, busy networks can increase Uniswap’s gas fees.
Only Supports Ethereum-Based Tokens
Uniswap operates on the Ethereum blockchain, so it can only support the use of Ether (ETH) and ERC-20 standard tokens on its platform. Bitcoin and other non-ERC-20 tokens aren’t available for trading or buying on Uniswap.
SushiSwap vs. Uniswap: Similarities and Differences
SushiSwap and Uniswap are both decentralized exchanges built on Ethereum that allow users to swap and trade crypto, but they have a few differences. Here’s how the two exchanges compare.
Native Token
- SushiSwap: SUSHI
- Uniswap: UNI
Supported Chains
- SushiSwap: Ethereum (main blockchain), Arbitrum, Optimism, Polygon, Base and more (over 30 chains total)
- Uniswap: Ethereum (main blockchain), Unichain, Arbitrum, BNB Chain, Polygon and more (13 chains total for Uniswap Labs products)
Number of Supported Cryptocurrencies
- SushiSwap: Over 300
- Uniswap: Over 1,300
Transaction Fees
- SushiSwap: 0.3% transaction fee for swapping/trading tokens
- Uniswap: 0.3% transaction fee for swapping/trading tokens
Rewards for Liquidity Providers (LPs) and Stakers
- SushiSwap: 0.25% reward from 0.3% transaction fee for LPs; 0.05% reward from 0.3% transaction fee for xSUSHI holders
- Uniswap: 0.3% reward from 0.3% transaction fee distributed proportionally to LPs
Key Features
- SushiSwap: swap/trade crypto, provide liquidity with liquidity pools, buy crypto with fiat, stake SUSHI and earn rewards
- Uniswap: swap/trade crypto, provide liquidity with liquidity pools, buy crypto at specified prices, buy crypto with fiat, send crypto directly to other wallet addresses
SushiSwap vs. Uniswap: Making the Choice
If you want a wide range of crypto to trade and be able to send crypto directly to other wallet addresses, Uniswap may be the best option for you. It provides complete visibility and control over your funds with limitless trading opportunities. If liquidity and having an easy avenue to stake SUSHI tokens is a deal breaker, SushiSwap is the way to go. SushiSwap also has some of the best deals available as well as security audit approval. Both are excellent choices if you’re looking for an anonymous exchange with few restrictions.
