SushiSwap CEO proposes new tokenomics for liquidity, decentralization


Jared Grey, CEO of the decentralized exchange SushiSwap, plans to restructure the token economics of the SushiSwap (SUSHI) token, according to a proposal. introduced December 30th in the Sushi forum.

As part of the new proposed tokenomics model, time-lock levels will be introduced for emission-based rewards, as well as a token-burning mechanism and a liquidity key for price support. The new tokenomics aims to boost liquidity and decentralization on the platform, along with strengthening “treasury reserves to ensure continuous operation and development”, noted Grey.

In the proposed model, liquid providers (LPs) would receive 0.05% of exchange fee revenue, with higher volume pools receiving the largest share. LPs will also be able to lock in their liquidity to earn enhanced, emission-based rewards. The rewards are forfeited and burned, however, if they are removed before maturity.

Also, spiked SUSHI (xSUSHI) will not receive any share of the fee income, but emission-based rewards paid in SUSHI tokens. Time-locked levels will be used to determine emission-based rewards, with longer time-locks resulting in larger rewards. Withdrawals before the maturity of time locks are allowed, but rewards will be forfeited and burned.

The decentralized exchange will use a variable percentage of the 0.05% exchange fee to buy back and burn the SUSHI token. The percentage will change based on the total time lock levels selected. The proposal notes:

“Because time locks are paid after maturity, but burns happen in ‘real time’ when a large amount of collateral is rejected before maturity, it has a considerable deflationary effect on supply.”

The tokenomics restructuring comes after SushiSwap revealed that it had less than 1.5 years of runway left in its treasury, meaning a significant deficit threatened the exchange’s operational viability. As reported by Cointelegraph, SushiSwap experienced a loss of $30 million over the past 12 months due to incentives for LPs due to the token-based issuance strategy, leading the company to introduce the new tokenomics model.