SushiSwap Moved Up Its Massive Liquidity Withdrawal From Uniswap to This Weekend

Uniswap competitor SushiSwap has aggressively moved up its massive withdrawal from its rival's liquidity pools, and may go live this weekend.

AccessTimeIconSep 5, 2020 at 12:31 a.m. UTC
Updated Sep 14, 2021 at 9:52 a.m. UTC

SushiSwap, the automated market maker aiming to unseat market leader Uniswap, has moved up its launch by five days.

Because of SushiSwap, total value in assets locked on Uniswap have gone up by just under $1.5 billion since the SushiSwap contract went into effect at block 10750000 on Aug. 28, according to DeFi Pulse, making Uniswap the largest holder of Ethereum assets in DeFi right now. 

Both Uniswap and Sushiswap are designed to always have a price at which they will swap any two tokens they have in liquidity pools.

One app is able to drive liquidity into another because of SushiSwap's liquidity mining scheme. SushiSwap promises to reward those who help it compete on liquidity with both a fee on trades and fresh governance tokens, which will also earn a portion of trading fees.

Uniswap is built without a governance token; it is instead a venture backed company. Liquidity providers (LPs) are rewarded by sharing the 0.3% fee on all trades within pools they have submitted liquidity too. 

Explaining how this works requires getting into the weeds of DeFi composability.

Under the original design for the SushiSwap launch, Ethereum users would get an extra-large share of SUSHI if they deposited Uniswap V2 LP tokens pre SushiSwap launch, over the two weeks following block 10750000. 

Uniswap runs on a series of pools of two tokens each. It uses these pools to allow users to make exchanges between any two ERC-20 tokens. Each of these pools has its own unique LP token that users get if they deposit liquidity.

These LP tokens can be withdrawn at any time for the users' share of that pool. SushiSwap is giving users an incentive to deposit large amounts into Uniswap and then turn the LP tokens they receive for doing so over to SushiSwap. Then, at the appointed time, SushiSwap will redeem all those LP tokens, moving a large amount of Uniswap's liquidity onto SushiSwap.

This is why some have referred to it as "vampire mining." 

Obviously, depositors of Uniswap's LP tokens have been promised exactly the same amount of SushiSwap LP tokens, so everyone will be made whole. 

According to one tool tracking SushiSwap's expected token share, the upstart has 79.9% of Uniswap's liquidity in LP tokens.

That liquidity withdrawal was originally scheduled to occur at the end of that two week bonus period, or on roughly September 11.

With a new proposal submitted by NomiChef, SushiSwap's creator, on Thursday, that timeline has been moved up to 48 hours from the "timelock," which is presumably sometime shortly following the end of the vote.

The vote ended at 14:00 UTC Friday, with just under 87% of SUSHI holdings voting in favor, which should mean the liquidity shift should happen sometime on Sunday.


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