SushiSwap CEO proposes new tokenomics for liquidity

  • CEO of SushiSwap announced a proposal to redesign the tokenomics of the SUshiSwap token
  • The model would allocate 0.05% of swap fees revenue to liquidity providers (LPs)

SushiSwap’s CEO, Jared Grey, introduced a proposal on 30 December 2022 to redesign the tokenomics of the SUSHI token, an attempt to revive the protocol amid a liquidity crunch.

The new proposed tokenomics model, time-lock tiers introduced for emission-based rewards, a token-burning mechanism and a liquidity lock for price support. 

The new optimal token focuses on incentivizing liquidity, promoting decentralization in the platform, and strengthening treasury reserves to ensure continual operation and development.

The model will allocate 0.05% of swap fee earnings to liquidity providers (LPs), with higher volume pools acquiring the largest share. LPs will be enabled with a liquidity lock for price support, a token-burning mechanism, and time-lock tiers for emission-based rewards. If they are removed before maturity, the rewards are forfeited and burned.

The forfeited rewards are burned when xSUSHI and LPs withdraw collateral prematurely from their time locks. The decentralized exchange SushiSwap will no longer receive any share of the fee revenue. Rather xSUSHI will receive emissions-based rewards paid in SUSHI. 

Also, stacked Sushi won’t receive any share of the fee revenue but is emissions-based in SUSHI tokens. Time-lock tiers will be pre-owned to regulate emissions-based rewards, with long-lasting time locks resulting in bigger rewards. Withdrawals before the maturity of time are permitted, but rewards will be forfeited and burned.

The decentralized exchange will use a percentage of 0.05% swap fee to buy and burn the SUCHI token. The percentage will substitute based on the total time-lock selected.

According to Grey, while time locks will be paid after maturity, but burns occur in real-time when a huge amount of collateral is prematurely unstacked, it has a substantial downturn effect on supply of SUSHI token.

SuchiSwap revealed to have less than 1.5 years of runway left in its project’s treasury, advisable that a remarkable deficit was endangering the exchange’s ability to operate. It led to the redesign of tokenomics.

ShushiSwap lost $30 million on incentives for LPs over the previous 12 months due to a token-based emission strategy, which caused the launch of the new tokenomics model.

Less than 24 hours after the release, Jared Gray received positive feedback, helpful suggestions, and some trolling. The first draft and we expect the final version to include an optimal model that considers the best ideas to improve it. After reading the whole document, some users think this is the best tokenomics seen in DeFi, Not on a high bar but seeing every mechanic has been though, and the model is low extraction to provide the best result.