Jared Grey, CEO of decentralized exchange SushiSwap, has plans to redesign SushiSwap tokenomics (SUSHI) token, according to a proposal inserted on December 30 at the Sushi forum.
As part of the proposed new tokenomics model, time lock levels for emission-based rewards will be introduced, as well as a token burn mechanism and liquidity lock for price support. The new tokenomics is aimed at boosting liquidity and decentralization on the platform, along with strengthening โtreasury reserves to ensure continued operation and development,โ Gray noted.
In the proposed model, Liquidity Providers (LPs) would receive 0.05% of redemption fee revenue, with higher volume pools receiving the lion's share. LPs will also be able to lock in their liquidity for enhanced emission-based rewards. However, rewards are lost and burned if removed before expiration.
I am excited to share the vision of @SushiSwapThe new token model of . I posted a short article about tl;dr on the Sushi forum and linked the entire proposal. We look forward to his questions and comments.https://t.co/D9TO2Oi8ra pic.twitter.com/GBrQKPzfiH
โ Jared Gray (@jaredgrey) December 30, 2022
In addition, SUSHI Stakes (xSUSHI) will not receive any part of the fee income, but rather issuance-based rewards paid in SUSHI tokens. Timelock levels will be used to determine emission-based rewards, with longer timelocks resulting in larger rewards. Withdrawals are allowed before the expiration of the time locks, but the rewards will be lost and burned.
The decentralized exchange will use a variable percentage of the 0.05% exchange fee to buy back and burn the SUSHI token. The percentage will change based on the total number of time lock levels selected. The proposal states:
"Because time locks are paid after expiration, but burns occur in 'real time' when a large amount of collateral is withdrawn before expiration, it has a considerable deflationary effect on supply."
Tokenomics redesign comes after SushiSwap's revealed to be less than 1.5 years old of track in its treasury, meaning that a significant shortfall threatened the operational viability of the exchange. As reported by Cointelegraph, SushiSwap experienced a loss of $30 million during the last 12 months in incentives for LP due to the token-based issuance strategy, which led the company to introduce the new tokenomics model.
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