Sushiswap's New Tokenomics Idea to Give Protocol New Beginning

SushiSwap’s New Tokenomics Proposal

Without diminishing current token holders or jeopardizing the protocol's financial stability, the suggested adjustments aim to boost liquidity, expand the usage of its native token sushi, and encourage maximum value for stakeholders. According to Grey, Sushiswap's runway is presently only 1.5 years.

The proposal states that the new model's main objectives are to promote decentralized ownership and encourage liquidity expansion through a comprehensive and sustainable reward structure that grows with volume and fees. The proposal lists four significant modifications to the tokenomics of the protocol.

Modifications Mentioned in the Proposal

One of the main suggested modifications is that staked sushi (xSushi) would now get emission-based awards rather than trading fee income rewards, which would still be paid out in sushi. The bulk of swap fees and increased benefits based on a new time-lock implementation they might choose to participate in will go to the financial intermediaries of trading pools who generate the highest volume. Additionally, a variable portion of trading fees would be employed to lock in liquidity and rebuy and destroy sushi from the open market to boost prices further.

In a final adjustment, the releases for the sushi token would be changed to 1-3% APY to decrease inflation and equalize the total emissions with the buy-backs, burns, and locked liquidity derived through trading fees.

Introduction of Non-Sticky Liquidity

The company's current business strategy encourages non-sticky liquidity, allowing customers who are not limited partners to stake sushi, get awards, and obtain the best ROI. Sushi discovered that its present xSushi architecture enables xStakers to obtain an excessive percentage of incentives compared to liquidity suppliers based on past data.