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What is Sushi?
Sushi is a community-driven organization built to solve what might be called the “liquidity problem.” One could define this problem as the inability of disparate forms of liquidity to connect with markets in a decentralized way, and vice versa. While other solutions provide incrementally progressive advances toward solving the problem of liquidity, Sushi’s progress is intended to create a broader range of network effects. Rather than limiting itself to a single solution, Sushi intertwines many decentralized markets and instruments.
Thus far, the core products, which will be described in more detail here, include: a decentralized exchange, a decentralized lending market, yield instruments, an auction platform, an AMM framework and staking derivatives. Sushi’s products are configured in a way that allows the entire platform to maintain decentralized governance of $SUSHI token holders, while continuing to innovate on the collective foundations by design. Whereas major structural changes are voted on by the community, the day-to-day operations, rebalancing of pools and ratios, business strategy and overall development is ultimately decided on by our core team.
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What Are Liquidity Pools?
\n Liquidity Pools are a place to pool tokens (otherwise known as liquidity) so that users can use them to make trades in a decentralized and permissionless way. These pools are created by users and decentralized apps (or Dapps, for short) who want to profit from their usage. To pool liquidity, the amounts a user supplies must be equally divided between two coins: the primary token (sometimes called the quote token) and the base token (usually ETH or a stable coin).
SushiSwap's liquidity pools allow anyone to provide liquidity to them; when they do so, they will receive SLP tokens (SushiSwap Liquidity Provider tokens). If a user deposited $SUSHI and $ETH into a pool, they would receive SUSHI-ETH SLP tokens. These tokens represent a proportional share of the pooled assets, allowing a user to reclaim their funds at any point. Every time another user uses the pool to trade between $SUSHI and $ETH, a 0.3% fee is taken on the trade. 0.25% of that trade goes back to the LP pool.
The value of the SLP tokens, which represent the shares of the total liquidity each pool, is updated with each trade to add their value relative to the tokens the pool uses to trade. If previously there were 100 SLP tokens representing 100 $ETH and 100 $SUSHI, each token would be worth 1 $ETH & 1 $SUSHI (note in this example, $ETH and $SUSHI are the same relative value). If a user were then to trade 10 $ETH for 10 $SUSHI in that pool, and another user were to trade 10 $SUSHI for 10 $ETH, then there would now be 100.025 $ETH and 100.025 $SUSHI. This means each LP token would be worth 1.0025 $ETH and 1.00025 $SUSHI now when it is withdrawn.
What is Yield farming ?
Yield farming is a means of earning interest on your cryptocurrency, similar to how you'd earn interest on any money in your savings account. And similarly to depositing money in a bank, yield farming involves locking up your cryptocurrency, called "staking," for a period of time in exchange for interest or other rewards, such as more cryptocurrency.
yield farming works by first allowing an investor to stake their coins by depositing them into a lending protocol through a decentralized app, or dApp. Other investors can then borrow the coins through the dApp to use for speculation, where they try to profit off of sharp swings they anticipate in the coin's market price.