SushiSwap CEO proposes new tokenomics to survive liquidity crunch
Dec. 31, 2022 at 10:50 pm
By Monika Ghosh
SushiSwap’s CEO, Jared Grey, introduced a proposal on Dec. 30 to alter the tokenomics of the SUSHI token in an attempt to revive the protocol amid a liquidity crunch.
On Dec. 6, Grey set off a furor in the SUSHI community after announcing that the project’s treasury had a runway of only 1.5 years. At the time, Grey proposed that 100% of the fees earned by SushiSwap be diverted to Kanpai, the project’s treasury, for one year or until new tokenomics are introduced.
The decentralized exchange (DEX) urged the fee diversion proposal, incurring a loss of $30 million in the past 12 months on liquidity provider (LP) incentives. According to Grey, this proved that SushiSwap’s incentive mechanism is “unsustainable” and requires realignment.
This is because the current tokenomics disproportionately distributes its fee revenue and emissions rewards to non-LPs, according to the formal tokenomics redesign proposal. In addition, since less than 2% of users who stake xSUSHI provide liquidity in any pool, the proposal noted that:
“Helping bolster liquidity in Sushi’s pools requires the realignment of token mechanics that properly align LP activity with the most rewards and value accrual.”
Grey’s proposed tokenomics aims to reward liquidity growth through a “holistic and sustainable reward mechanism that scales with volume and fees.” In addition to increasing liquidity, the new tokenomics model seeks to create more utilities for SUSHI and “promote maximum value for all stakeholders.”
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