• SushiSwap CEO Jared Grey has proposed a new tokenomics model to address the liquidity crunch on the platform.
• The proposed model includes token burning, time-lock tiers, and an end to revenue sharing with non-liquidity providers.
• The new tokenomics model aims to realign incentives to reward liquidity providers and bolster liquidity in Sushi’s pools.
SushiSwap, the decentralized exchange (DEX) platform, has proposed a new tokenomics model to address the liquidity crunch on the platform. The proposal was introduced by SushiSwap CEO Jared Grey on Dec. 30th.
The liquidity crunch has been a major issue for the SUSHI token, and the project faced a 1.5 year runway on Dec. 6th. To counter this, 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. This proposal has caused a loss of $30 million in the past 12 months on liquidity provider (LP) incentives.
The new tokenomics model proposed by Grey aims to realign incentives to reward liquidity providers and bolster liquidity in Sushi’s pools. This is because the current tokenomics disproportionately distributes its fee revenue and emissions rewards to non-LPs. The proposal noted that less than 2% of users who stake xSUSHI provide liquidity in any pool.
Under the new tokenomics model, SushiSwap will introduce token burn, time-lock tiers, and stop revenue sharing with non-liquidity providers. Token burning will occur by burning SUSHI tokens from the SushiSwap treasury when certain conditions are met. Time-lock tiers are also being introduced to incentivize liquidity providers for their long-term commitment to the platform. Lastly, the new model will stop the revenue sharing with non-liquidity providers, and instead direct all revenue to LPs.
In order to ensure the success of the new tokenomics model, the SushiSwap team is also introducing a new governance system. This will allow the community to vote on any potential changes to the model, and also provide a platform to discuss any issues or feedback related to the new tokenomics.
Overall, the proposed tokenomics model is an attempt to bring sustainability to the SushiSwap platform and create an environment that rewards liquidity providers. The team is optimistic that the new model will be successful in increasing liquidity on the platform and creating a more equitable distribution of rewards.