SushiSwap 101: A Beginner’s Guide & FAQ
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This article is meant to act as a tutorial for new SushiSwap users or for people who are just discovering the benefits of DeFi altogether.
First of all, welcome to SushiSwap! We are confident that this guide will help you harness the many opportunities that the platform has to offer and avoid any confusion that might come along the way.
Why Do So Many People Use SushiSwap?
Decentralized exchanges, like SushiSwap have become overwhelmingly popular in the past few months. Compared to traditional exchanges, using SushiSwap can be much simpler and faster to use when buying and selling cryptocurrencies, not to mention their added security. On top of that, you can find many tokens on decentralized exchanges, or DEXes, that you can’t find anywhere else! DEXes offer a great way to discover unique opportunities.
SushiSwap is a DEX, but also known as an automated market maker (AMM), which put extremely simply, means that it uses a mathematical formula (x*y=k) to automatically give you price quotes for the tokens you want to swap. When you trade on other cryptocurrency exchanges, like Coinbase, you are relying on the institution, or Coinbase, to act as a middle man to confirm the price of your desired tokens and process your trade. In that case, the fees on each transaction go to the institution. On SushiSwap, you are relying on the formula to handle these processes for you.
Since there is no institution, there are less hoops for you to jump through to execute your trades and transaction fees are paid to the users who provided liquidity, just as it should be!
How to Start Using SushiSwap
For starters, you don’t need to create an account, which means no need to take a selfie to verify your identity! All you need is a wallet, with some tokens in it. You may have noticed that there is more than one version of SushiSwap. We know that this can be a bit confusing, so here is a clear comparison chart of the three platforms. Going forward, we will use the following terms for the respective three interfaces:
www.sushiswapclassic.org = Classic
www.sushiswap.fi = Fi
lite.sushiswap.fi = Lite
*For a clear explanation on what Zapper does and how you can also avoid liquidity providing fees, please see the ‘Liquidity’ section down below.
**For a clear explanation on the difference between limit and market orders and how you can use them, please see the ‘FAQ’ section at the end of this article.
***For a clear explanation on the difference between the aforementioned DeFi transaction options, please see the ‘DeFi Options’ section down below.
Which SushiSwap Site Should I Use?
If you are still confused about which SushiSwap platform you should use, we suggest that you start with either SushiSwap Lite or FI, as Classic will be discontinued as a platform in the future.
It’s good to keep in mind that, regardless of which interface you use, all three will offer the same token pricing, APYs and vesting periods. This is because all SushiSwap sites use the same pools of tokens. If there are any discrepancies between any figures, please note that it is most likely a temporary error and please consider the APYs, and other information, shown on Fi to be the most accurate.
If you would like to know more about what to do when you find a discrepancy in APY percentages, token prices or reward figures, please jump to our FAQ section at the end of this article.
Swapping Tokens 101
Your first step in getting to know SushiSwap should definitely be through a simple swap.
Tokens ready? Let’s start SushiSwapping!
Simple Trade Overview
Step 1: Select an interface (Classic, Fi or Lite)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Select the tokens you want to swap
Step 4: Click “Swap” and you’re done!
Step 5: Wait for the transaction to complete and see your tokens appear in your wallet
The first thing you’ll need to do is connect your wallet to your desired platform. Here are the screenshots of where to find that on each page.
In order to allow SushiSwap access to the tokens in your wallet and proceed with a trade, there will be a small fee associated with this initial connection process. This fee is something that cannot be avoided as it is a fee charged by the Ethereum blockchain. The fees are paid to the ETH miners, not to SushiSwap. Please make sure you have some Ethereum tokens in your wallet to pay for the gas fees when you trade!
Let’s try a simple trade for starters, like a market order, which is more straightforward. Select the token you wish to sell and the token you wish to buy. If you cannot find the token you are looking for, you can search the token in Etherscan, copy its ‘Token Contract Address’ and paste it into the search bar on SushiSwap’s exchange. If it still does not show any results, please refer to the section ‘What to Look Out for When Trading on SushiSwap’ down below.
After selecting your desired tokens, input the number of tokens you wish to sell. You will see how many new tokens you will receive, the price impact, which we will discuss a little further on, and the total fee. After clicking ‘Swap’ or ‘Approve,’ you will receive a prompt from your wallet, asking you to approve the trade and the gas fees associated with the trade. Once you approve the trade again from your wallet, the transaction will execute and you just have to wait for the process to complete! You can see the status of your transaction in your wallet or by copying the transaction hash and checking it on Etherscan.
What to Look Out for When Trading on SushiSwap
Searching for Tokens
What if the token you want to buy is not showing up when you search it? Either search for the token in a different Token List and select that list or search for the token contract address on Etherscan and paste it in the search bar.
On SushiSwap, you can only trade ERC20 or Ethereum-based tokens. With that being said, you may be shocked that you cannot buy Bitcoin, for example. Instead you can buy WBTC, Wrapped Bitcoin! Wrapped just means that it is the same underlying asset, but made to function on an Ethereum-based platform.
Due to the overwhelming amount of ERC20 tokens, which is constantly increasing, it was hard for many DEXes to keep up with the due diligence required to screen new token additions. Since DEXes do not have “gatekeepers” in the traditional sense, this resulted in many fake coins being created and many users being scammed out of their hard earned crypto. To avoid this and provide added security, SushiSwap implemented the use of token lists, many of which are based from trustworthy sources, like Coin Gecko or Compound. If you cannot find the token you are looking for, try opening a different list!
Please note that the list function is only available on the Classic or Fi interfaces. When searching for a token in either of the two platforms, click change at the bottom right. Select the list that has your token! If you cannot find your token, it means that the token is not available for trade yet on SushiSwap.
SushiSwap Lite only uses 1 list for simplicity, but you can add tokens that do not come up in search by, again, copying the token address from Etherscan and pasting it in the search bar.
Slippage Tolerance
Cryptocurrencies can be highly volatile. This means, that you might not get the number of tokens you expect when you execute a trade. Usually, the difference is not very high, but it can be confusing for new users. If you are buying a token that tends to have big, sudden price jumps or is currently in a significant downward or upward trend, you might want to try using the slippage option on the Fi interface.
Slippage tolerance means that you can only accept or tolerate a maximum percentage of price changes. SushiSwap uses the aforementioned formula to calculate the price of your desired token and estimates how many tokens you will receive, but due to market volatility, this estimation could suddenly and drastically change. You can avoid these changes by adding a slippage tolerance by selecting the maximum percentage amount you are comfortable with the price changing. Sometimes, when you add a slippage tolerance, the trade cannot process, because the price changed more than your desired maximum. Keep trying or if you’re okay with a slightly higher than 1% difference than expected, don’t add any slippage tolerance!
Price Impact
You might get this message when trying to execute a trade: Price Impact Too High. This means that you intend to buy enough tokens to significantly change its price if you execute the trade. As you can see, the price impact is 26.21%. If you buy a token that is $10/token, the price will be $12.62/token after this trade. You cannot process trades that will affect the amount in the reserves too significantly.
Cancelling/Reversing a Trade
Due to the nature of cryptocurrency trading, once you execute a trade you cannot reverse it. If the trade is still pending, and you’re quick enough, you can request to cancel the trade from your wallet.
A Transaction is Taking Worryingly Long
When a transaction is pending for a very long time, it is more than likely that the processing speed you originally chose was too slow. We suggest that you cancel the transaction in your wallet and execute it again, but choosing a faster processing speed. Please keep in mind that, yes, faster speeds mean higher fees!
What Else Can I Do Other Than Trading Tokens?
Now this is a great question! SushiSwap offers so many exciting opportunities for you to take advantage of, many that go beyond just a simplistic cryptocurrency trading platform. Let’s take a deeper look at the lucrative features that made SushiSwap the DeFi powerhouse it is today.
It’s good to keep in mind, as you read on, that with all the various yield-bearing options available, gas fees are still very high. The fees to redeem these earnings could be higher than the gains themselves. These fees are based on the Ethereum network and are out of SushiSwap’s control.
Liquidity Providing
Imagine you really want to buy a token, but there are none on the market to buy or you really want to sell a token, but you can’t find anyone to buy it. An exchange needs one basic thing to run, liquidity! Traditionally, centralized exchanges provide and manage this liquidity. On SushiSwap, the liquidity is provided voluntarily by its users. In return, SushiSwap rewards those who provide temporary access to their tokens with rewards in SUSHI tokens. This option could be a great opportunity to earn extra yields on tokens that are just sitting in your wallet.
Historically, cryptocurrencies had no options for stable yields. People bought and held, hoping for a big pump to make their investment worthwhile. This waiting period was considered an opportunity cost by many, and thus the “governance token” was born. SushiSwap’s governance token is the SUSHI token, and before we get more into how you can earn SUSHI, we’ll focus on the LP rewards.
For providing liquidity, you, as an LP (Liquidity Provider), earn a share of the platform-wide 0.3% transaction fees. Those fees are provided to you in LP tokens, which you receive when you remove liquidity.
Liquidity Provider 101
Step 1: Select an interface (Classic, Fi or Lite)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Select the input tokens to create your pool (Please note that the 2 token amts need to match each other in monetary value! e.g. LINK $100–ETH $100)
Step 4: Approve SushiSwap to access the tokens.
Step 5: Supply your liquidity pool!
You will now start earning LP tokens for providing liquidity for SushiSwap. You will receive the total of these rewards when you remove your liquidity. Unfortunately, due to the complex nature of this rewards system, it is nearly impossible to calculate the exact amount of returns in a percentage form. But rest assured, that your liquidity will be earning transaction fees, based on swaps made between the two assets you provided.
The simplest and quickest way to provide liquidity is to use SushiSwap Lite’s 1-Click Zap function. This feature offers users the ability to bypass fees and optimizes gas as it reduces the number of transactions necessary for completing the execution of becoming an LP.
Being an LP seems like a no-brainer, right? For many people it is, however, although you are offsetting an opportunity cost risk by earning interest while you hold, you are exposing yourself to another risk, called impermanent loss. This tutorial will not delve too much into the intricacies of this type of loss, but, instead, will give a simple explanation.
Impermanent loss has been described as the difference in your token value in the liquidity pool versus simply holding them in your wallet. If one of your tokens skyrockets on traditional markets, your assets do not automatically update to match. At this “time lag” stage, there is an opportunity for traders to buy your assets in the pool at a lower price and resell on a centralized exchange at a higher price, realizing an arbitrage gain. That gain could have been yours! Instead, this stolen opportunity can be classified as your impermanent loss. This is one of the risks you take as an LP.
The best-case scenario for an LP is when there are many transactions in the pool and the price of each token does not have significant price fluctuations. The more transactions, the more share of the transaction fees you will earn. So, if you are going to become an LP and earn some yields, it is best to consider the trendiness or popularity of the pool.
You can see an overview of your liquidity pools and see how much you have earned on the home screen of SushiSwap Lite. The displayed numbers are the fees that you have earned. There is no vesting period for these earnings and when you remove liquidity you will also take your earnings. To remove liquidity, simply click ‘Remove’ to initiate the transaction.
Please note that, although you entered an equal amount of each token when you added liquidity, you will probably receive more of one token than the other. For this reason, many liquidity providers tend to use stablecoin assets as one half of their LP.
If you cannot see your liquidity, it probably means you have staked it in a farm. In this case, you need to ‘Unstake’ from the farm first to remove the liquidity entirely.
Farming
Farming on SushiSwap is connected to being an LP, but different because you grow SUSHI rewards. Who would’ve thought, in the 21st century, we’d all be farmers? Farms are also known as Menus in the SushiSwap universe, because, sushi.
Farming 101
Step 1: Select an interface (Classic, Fi or Lite)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Ensure that you have already provided a liquidity pair before continuing.
Step 4: Select the farm you wish to join and start growing your SUSHI!
Step 5: To receive your rewards, select ‘Harvest’ to gain your SUSHI (not including rewards subject to vesting/lockup periods.)
Please note that SUSHI rewards have a vesting or lockup period. 1/3 or 33.33% of your rewards are available immediately! The remaining 2/3 or 66.67% will remain vested or locked for 6 months. You do not need to keep your tokens staked in the farm for the entire 6 months. You can unstake your tokens at any time and still keep your accrued rewards.
The SushiSwap Farms all look a little different on each interface. The figures most users will focus on is the APY and the multiplier, also known as the allocPoint. It is good to keep in mind that Classic does not display the reward multiplier, but, even so, you will receive any associated allocPoint regardless of where you click ‘Farm.’
Farming is different to liquidity providing in the sense that you are receiving more rewards from the DEX, with the assumption that the added rewards will add enough incentive to keep you from removing your liquidity. Remember, that an AMM needs liquidity to function! Ensure that you already have completed the process for becoming an LP before trying to farm. Otherwise, you will get an error message.
There is an added transaction fee when unstaking your tokens from the farm, one to unstake and then one to remove liquidity. Since farming is related to liquidity providing, is it important to note that the same impermanent loss risks are still present.
In order to quit your life as a farmer and remove your liquidity from the farm, click ‘Harvest Sushi’ on Lite, select the amount you wish to remove and, finally, click ‘Withdraw.’ In the Fi interface, click ‘Unstake,’ input the amount you wish to remove and, finally, click ‘Confirm.’ On the Classic interface, click ‘Unstake,’ followed by ‘Harvest.’
Home grown SUSHI really is the yummiest.
Staking
Welcome to the SushiBar, where the revolving belt is serving plates upon plates of xSUSHI! SushiSwap not only offers you the opportunity to earn SUSHI on your dormant tokens, you can also earn xSUSHI on your stored SUSHI! Rewards on rewards? Now it must be becoming clear why SushiSwap is so popular!
Staking 101
Step 1: Select an interface (Classic or Lite)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Ensure that you have SUSHI to stake in your wallet
Step 4: Input the amount of SUSHI tokens you wish to stake, then click, you guessed it, ‘Stake!’
You can find details about xSUSHI, like staking APY, here.
You might be wondering what the value is of xSUSHI that makes staking worthwhile. Well, for starters, limit order fees are allocated to xSUSHI holders and with the introduction of Bento Box, 9% of the fees accrued from services provided from that platform will also go to xSUSHI holders.
Once per day or more, the liquidity provider rewards contracts are closed and all LP tokens are swapped for SUSHI tokens, which are sent, proportionately, to xSUSHI holders. At this time, xSUSHI would have a greater value than the bought SUSHI tokens.
Users can unstake at anytime and there is no vesting period associated with xSUSHI.
Migrating
Uniswap has recently terminated their rewards-based liquidity provision program. In light of this, we are offering Uniswap LPs the opportunity to seamlessly and, more importantly, gas efficiently transfer their liquidity pool from Uniswap to SushiSwap to start earning governance tokens again. Winter has come to Uniswap, time to migrate South to better weather at SushiSwap!
Migrating 101
Step 1: Select an interface (Lite or Fi)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Ensure that you have liquidity on Uniswap
Step 4: Allow access to your Uniswap LP tokens on your wallet
Step 5: Click ‘Migrate’ on SushiSwap Lite
The benefit of migrating your LP is that you earn SUSHI rewards on top of the LP fees, which on SushiSwap is 0.25%. *Hint! You can also earn an additional 0.05% via xSUSHI when you stake your SUSHI!
Please note that as with any liquidity providing execution, you are exposing yourself to impermanent loss risk. However, unlike Uniswap, SushiSwap rewards your risk tolerance with mouth-watering SUSHI.
Onsen
In the past, SushiSwap would offer liquidity providers extra rewards through temporary surges in allocPoints and exaggerated yields through “Menu of the Week.” The special pairs would update every week through community voting structures. SushiSwap’s new program, Onsen, will replace the Menu of the Week and is the prime liquidity mining incentivization infrastructure. The difference this time is, menus stay the same for 60 days instead of the mere 7. Get ready for steamy APYs and even steamier multipliers.
Onsen 101
Step 1: Select an interface (Fi only)
Step 2: Connect your wallet to SushiSwap (make sure you have some Ethereum to cover gas fees!)
Step 3: Choose the Onsen liquidity pair you want to participate in
Step 4: Add liquidity first
Step 5: On Onsen, scroll to the liquidity pair and click ‘Stake’
Be sure to keep up to date with menu changes! If you want to have your say on what pairs should be in the coming Onsen, have your say on Discord!
What to Look Forward to With SushiSwap
SushiSwap does not have a public roadmap at this time, however, we suggest that you check the SushiSwap discord here (https://discord.gg/MpwtXyMW) to keep up to date with the project’s announcements.
FAQ
Is it safe to use SushiSwap?
You may have heard or seen news headlines in the past that have talked about centralized exchanges being hacked. This is particularly dangerous, because many users tend to keep their assets in the exchange’s wallet to avoid paying transfer fees, faster liquidity, etc. Since you do not hodl your assets on SushiSwap or use it as a storage tool, the risk of this is eliminated.
With the integration of Token Lists on the system, you can have confidence when trading on SushiSwap, that the tokes are real, as they are verified by reputable sources.
What are the risks involved in using SushiSwap?
One of the main risks associated with DeFi features is called impermanent loss. To see a detailed explanation of what this is, along with a visual aid, we recommend reading this article for further insight: https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22
Is there a way to calculate my impermanent loss?
Yes, you can go to https://apy.vision to check your impermanent losses.
Why does SushiSwap have fees?
SushiSwap is a decentralized exchange or AMM. As such, it requires regular users to provide liquidity to the exchange in order for it to function. Liquidity providers or LPs receive rewards for doing this. Each time a transaction is executed on SushiSwap, there is a 0.3% fee. That 0.3% goes to the various liquidity providers across the platform.
What are the different fees on SushiSwap?
When first getting started on SushiSwap, you may encounter a few different looking fees. When making a swap, you will be charged a 0.3% fee. You will also be charged a gas fee by the Ethereum network, which you will need to approve within your wallet. When trying to provide liquidity, your wallet will charge you a small gas fee to approve access to your tokens. Transferring the liquidity to the exchange will also result in a gas fee, which is a little higher than the previous. When farming, you will also have to pay a gas fee to stake. The same gas fees also apply when unstaking or removing liquidity. When harvesting your SUSHI, there is also a relatively small gas fee, depending on the gwei (network activity level). Finally, when migrating your Uniswap LP tokens, you will encounter something called a ‘Relayer fee,’ which is a fee set by the relayers for witnessing and validating this transaction. This is an added security measure for your protection.
What is the breakdown of the fees?
The total fee is 0.3%. Of this, 0.25% is given back to the liquidity providers in SUSHI and 0.05% is given to the stakers in xSUSHI.
I provided liquidity, but when I go to check my LPs, why does nothing show?
This most likely means that the transaction either failed or you are currently staking your LP in a farm. If the transaction failed, you can see the error in your wallet. If you are currently in a farm, you can check the LP in your current farms.
Why are there different APYs showing on the different interfaces?
This is most likely due to a temporary error (APYs are extremely complex calculations!). Please consider the APY values on www.SushiSwap.fi to be the most accurate.
SushiSwap’s governance token, SUSHI has a hard cap? What does this mean?
SUSHI’s hard cap will be reached in November of 2023 when all 250 million tokens have been distributed. After that date, the exchange will no longer offer rewards in SUSHI.
What are the vesting period details for SUSHI?
1/3 or 33.33% of your rewards are available immediately! The remaining 2/3 or 66.67% will remain vested or locked for 6 months. You do not need to keep your tokens staked in the farm for the entire 6 months. You can unstake your tokens at any time and still keep your accrued rewards.
Where can I check my vested SUSHI balance?
The team is working on a feature that will accurately display your vested SUSHI details. For now, you may check at https://app.boring.finance/#/, which is a temporary solution to this issue.
What is the difference between a limit and a market order?
If you are using either the FI or LITE interfaces, you will need to choose whether you want to perform a market or limit order. The Classic interface can only process market orders. Market orders will get you the best possible price at the precise time you click ‘Swap.’ When you choose to process a Limit Order, you can also choose the price you wish to trade at. Your trade request will last 24 hours. If your desired price, or lower, is unavailable during those 24 hours, than it will expire.
Why will my trade not go through and why do I keep getting an error?
Please ensure that you have enough Ethereum (ETH) in your wallet to cover the gas fees associated with your trade. Please also ensure that you are using the correct wallet that holds the assets you wish to trade.
SushiSwap is a decentralized exchange? Does that mean no one works there?
SushiSwap has several teams who are behind the scenes, ensuring the functionality and growth of the platform. The team that ultimately make decisions in the SushiSwap ecosystem are called the Multisigs. This group is comprised of 9 prominent and trusted members of the DeFi/Ethereum ecosystem, and they must approve any use of the devfunds. A decision requires a minimum of 7out of 9 signatures to move forward.
The members that comprise the Multisigs are as follows, by Twitter handle:
@SBF_Alameda, @rleshner, @0xMaki, @lawmaster, @cmsholdings, @mattysino, @mickhagen, @JiroOno, @zippoxer
The Operations Multisig is primarily comprised of core team members and is the hurdle that needs to be passed for any changes to our smart contracts. Any decision requires a minimum of 3 signatures out of 5 to move forward.
The members that comprise the Operations Multisig are as follows, by Twitter handle:
@0xMaki, @LevxApp, @OmakaseBar, @JiroOno
What Do the Operations Multisig Team Decide On?
The Operations Multisig team are responsible for adding and/or removing liquidity pools, updating the reward pool structure (including SUSHI and xSUSHI block rewards), they approve transactions made from the growth fund and decide on any changes that are to be made by the smart contracts.
Where can I keep up to date with all things SushiSwap?
We suggest that you follow announcements in SushiSwap’s Discord channel here.
