This article is from November 2021, and SushiSwap price has had some dramatic moves up and down. But the underlying fundamentals described in this article have not changed.
It appears to be extremely difficult for investors to get a raw deal with SushiSwap (CRYPTO:SUSHI). A decentralized exchange (DEX), SushiSwap was originally a fork of Uniswap. Since its early days, SushiSwap and the SUSHI token have become a lucrative space for investors to provide liquidity.
SushiSwap’s offering and community-recommended strategies are complex. Let’s look at three reasons the SushiSwap token may provide good value for investors today.
1. One-stop shop for passive income
Many other decentralized exchanges do not offer the diversity of offerings that SushiSwap does. That is, when it comes to passive income opportunities.
SushiSwap provides investors access to liquidity pools. These pools allow investors to earn fees on the SushiSwap exchange, for tokens listed on the platform. This is not unique among DEXs.
However, SushiSwap can do this on 14 different blockchains. This is an extremely robust and unique offering. SushiSwap pools reward liquidity providers with LP tokens, which can be put to work yield farming. This can happen all within SushiSwap and is the best way to make more SUSHI.
Uniswap, the DEX on which SushiSwap was originally based, does not have this functionality. As a result, SushiSwap has become the fifth-largest DEX by volume. The future looks bright for the SUSHI token simply because of how many ways there are to use it. SUSHI is not a governance token, it is a utility token. That is what it brings to investors: utility.
2. Gas-efficient borrowing
SushiSwap offers a smart contract called BentoBox that acts as a token vault. Depositing one’s tokens within the vault earns more tokens over time.
BentoBox supports several decentralized applications, or dApps. Importantly, investors can interact with dApps in a gas-efficient manner using BentoBox. (In the crypto world, gas refers to the fees related to carrying out transactions on the Ethereum blockchain). This is because BentoBox was designed to require the minimum number of actions possible by the developer and user. Accordingly, investors can choose to lend their SUSHI on the lending dApp Kashi and maximize their returns over time.
Kashi has the power to revolutionize the way lending works in Defi because anyone can create a contract to loan a token. This truly allows traders and investors to take advantage of the high returns possible in the Defi space.
3. Trident set to create new pool opportunities
The value of BentoBox to the SUSHI token and the SushiSwap ecosystem cannot be overstated. It allows investors to deposit their tokens and generate passive income with little to no effort. That’s why an automated market maker (AMM) built on top of BentoBox has the power to take things one step further. Trident, currently in development, will be that solution, adding four new pool types that allow for new possibilities in liquidity providing.
Trident is especially innovative with its concentrated liquidity pool offering. This allows investors to specify which price range they want to add liquidity to within a token pair. Previously, when you added liquidity to a pool and it increases in popularity, your returns can become smaller. This pool type encourages liquidity providers by giving them greater fees within a given price range.
Investors looking for above-average returns could consider Trident, as it is one of the only AMMs that provide passive returns on deposits. This is great news for SUSHI, which will be one of the most traded token pairings on the AMM, further supporting its price.
Not for the faint of heart
Often, the more complicated an investment is the riskier it is. That is certainly true in the cryptocurrency world. SushiSwap is not for the faint of heart. The rewards can be incredible, but there is a steeper learning curve in understanding the software and strategies proposed by the community.
Of course, we advocate for a long-term buy-and-hold strategy. However, with a token tied to a decentralized exchange, the risks and potential volatility of such an investment can be much higher than with other tokens. Investors are exposed to the potential for regulatory risks, and security concerns become amplified.
However, those bullish on the continued rise of decentralized exchanges may want to take a hard look at SUSHI. There’s a reason this is a fast-growing, top-five decentralized exchange. Accordingly, this is a token that’s on my watch list right now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.