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Rather than being supported by one central entity, tokens traded on SushiSwap are maintained by smart contracts, and users lock crypto on the software that can then be accessed by traders.

Of note, those who trade against locked assets pay a fee that is then distributed to all liquidity providers proportionally, based on their contribution to the pool.

SushiSwap Farms

Liquidity providers contribute to SushiSwap pools by connecting their Ethereum wallet to the SushiSwap farming software and locking two assets into a smart contract. For example, SushiSwap’s USDT/ETH liquidity pool consists of equal values of USDT and ETH deposits.

Buyers can then swap tokens within the pool based on the protocol’s rules. Smart contracts running SushiSwap take the amount of tokens from the buyer and send an equivalent amount of tokens back, keeping the total pool price constant.

In exchange for maintaining liquidity in these pools, providers are then rewarded with protocol fees, along with a portion of the 100 newly minted SUSHI daily.

Providers can reclaim their funds whenever they wish, along with their “harvest”, which is the cryptocurrency earned from farming.

Users wishing to earn more cryptocurrency after harvesting their SUSHI can make use of the SushiBar, an application that allows them to stake their SUSHI to earn the xSUSHI token, which is composed of SUSHI tokens bought on the open market with a portion of all the fees generated on the exchange.