The new tokenomics aims to increase platform liquidity and decentralization, allowing SushiSwap to continue with business as usual.
The new measures
According to a proposal (1) posted on December 30 on the Sushi forum, Jared Grey, CEO of the decentralized exchange SushiSwap, intends to alter the tokenomics of the SushiSwap token. A token-burning mechanism, a liquidity lock, and time-lock levels for emission-based incentives will all be included in the new suggested tokenomics paradigm. Along with improving "treasury reserves to enable continued operation and development," Grey added that the new tokenomics intends to increase liquidity and decentralization in the platform.
Liquidity providers (LPs) in the proposed model would get 0.05% of swap fee income, with greater earning the largest proportion from volume pools. LPs will now have the option of locking their liquidity to get increased emissions-based incentives. But the benefits are lost and destroyed if they are taken away before maturity. Staked SUSHI (xSUSHI) will only receive emissions-based incentives given in SUSHI tokens, not a piece of the fee money. Time-lock tiers will determine emission-based awards, with longer time locks yielding larger prizes. Withdrawals are allowed before the maturity of time locks, but rewards will be lost and destroyed.
Impacts and Losses
The decentralized exchange will repurchase and burn the SUSHI token using a variable portion of the 0.05% swap fee. The percentage will fluctuate depending on the overall number of time-lock levels chosen. The suggestion states that time locks are compensated When a significant quantity of collateral is unstacked before maturity, it has a significant deflationary impact on supply. Still, burns occur in "real-time" before maturity.
SushiSwap announced that it had fewer than 1.5 years (2) of runway left in its treasury, indicating that a huge deficit was endangering the exchange's capacity to operate. This led to the redesign of tokenomics. SushiSwap lost $30 million on incentives for LPs during the previous 12 months due to the token-based emission strategy, which prompted the launch of the new tokenomics model.