unknown 1

Proposal to Build Sushichain Catches Eyeballs, Raises Eyebrows

First came the tweet, then countless discussions and debates followed. Within days, voila! A governance proposal materialized.

This pattern is rapidly becoming the norm for DeFi protocols. This time the initiator was Sam Kazemian, the founder of Frax Finance,  a protocol for a fractional-algorithmic stablecoin. His tweet suggested that Sushiswap, the automated market maker, should release a blockchain that facilitates swaps between assets on the other blockchains that run on its platform.

Sam Kazemian

The idea is that such a move would address how Sushiswap’s liquidity is currently fractured across blockchains, said Dave Liebowitz, head of growth at smart contract automater Gelato, in the followup proposal. The value locked in Sushiswap deployments on the Ethereum, Polygon, and Fantom blockchains were at $4.3 billion, $649 million, and $65 million respectively at the time of writing.,

Unite Liquidity

Sushiswap’s team has also deployed the protocol to blockchains like Binance Smart Chain, and Avalanche, prompting questions on whether the project would be better off linking all the sources of liquidity together. That would make tokens previously stuck on their own blockchains more liquid and would generate more fees for Sushiswap.

The proposal echoes the move by Compound Finance, a lending protocol, to deploy its own blockchain to unite liquidity across the others on its system. In a video during the Community Conference hosted by Celo, Compound’s founder, Robert Leshner, said that by taking this step “the marginal utility of each asset increases as a function of how many other assets it can enter a Compound with.”

“Cross chain liquidity is a small but rapidly growing problem, and is fertile ground for Sushi to explore.”

Robert Leshner

This means that the more assets which can be borrowed against an asset, the more valuable that asset is. Put in the context of an exchange like Sushiswap, the increased cross-chain liquidity may increase the utility of previously blockchain-isolated tokens, as well as increasing Sushiswap usage. And that’s good for everybody.

“Sushichain would prove that a project that began as a simple solidity fork, is capable of innovating in entirely new directions,”’ Leshner told The Defiant. “Cross chain liquidity is a small but rapidly growing problem, and is fertile ground for Sushi to explore.”

THORChain Fork

As always, however, the devil’s in the details. And a lively discussion of the technical finer points ensued.

Kezemain’s original tweet suggested that Sushiswap fork THORChain, the blockchain designed to serve as a cross-chain decentralized exchange. 

Interestingly, THORChain didn’t seem to mind, tweeting that “the best solution is to fork THORChain’s current codebase,” which works with EVM, UTXO, and Cosmos chains. The project even recommended using “Sushi as the node bond.” 

THORChain nodes must bond the project’s native RUNE token in order to participate in the network. If the node defects and tries to steal funds from the protocol, their bond is deducted by the amount of the assets they stole. 

Using SUSHI as a node bond may not work as well as it has with RUNE, as SUSHI would inherit its utility from its use in the AMM from functions such as staking. As Twitter user Aaron ₿ put it, “forking rune requires remaking sushi token’s entire value accrual mechanism.”

Ren Already did the work?

The proposal to create a Sushichain received some pushback in the comments section as well, with Max Roszko, an ecosystem advocate at RenVM, saying that “Sushi right now already has cross-chain support, through Ren, for free.” 

RenVM issues ERC-20 versions of Bitcoin, Bitcoin Cash, ZCash, and Dogecoin, allowing users to trade the ERC-20 versions for other currencies on Ethereum, Binance Smart Chart, Polygon or Fantom. 

Roszko also pointed out that THORChain “will never practically integrate with the rest of DeFi as it from a technical standpoint can’t.” This underscores the implementation issues behind what is an intriguing idea in deploying a Sushichain as a THORChain fork, but may need to be more fleshed out. 

If only as a thought experiment, the proposal struck a chord. Even Degen Spartan, an influential voice on DeFi matters, mused about a Sushichain based on a THORChain fork.