Grayscale’s Deeper Dive into SushiSwap

Rayhaneh Sharif-Askary: Hi, everybody. Welcome to the Deeper Dive into SushiSwap. Thank you for joining. I'm joined by our head of research, David Grider,-

David Grider: Hey, everyone.

Rayhaneh Sharif-Askary: ... and core contributors Omakase and Rachel Chu. We are going to give folks a few minutes to join, so bear with us, and then we'll dive in. So I think we have critical mass. Thank you all for joining us. The purpose of these webinars are to introduce investors, to provide context for investors around the protocols that underlie Grayscale products, developments over the last couple years, and really make this more tangible for our investors. So SUSHI is part of our DeFi product, which many of you know about and we can talk more about later. Before diving in, we are going to have a litany of disclaimers, which I'm going to read off now.

"Today's call is being hosted and recorded by Grayscale Investments. All opinions expressed by members of the SushiSwap team and members of the Grayscale team are their own and do not reflect the opinions of Grayscale or any of its affiliates. The call is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to sell or buy any security, and it should not be relied upon as a basis for an investment decision. Clients of Grayscale may maintain positions in the digital assets or securities discussed on this call. None of this is investment advice. You should always consult your own broker or advisor. And our private placements, including the Grayscale DeFi Fund, are available only to accredited investors."

All right. So with that, and you guys, we can kick it off, might have noticed that Omakase and Rachel are represented here today via these awesome filters that are anime. The reason for that is that they are very sensitive to security. They want to protect the DAO and the larger currency from any potential threats, and it's really just super fun in advance of Halloween later this week. So let's dive in. Can you give us some background on how SushiSwap came to be created and how you all got involved? What's the problem that you were aiming to solve?

Omakase: Definitely. I think most of everyone at Sushi was involved as a community member. The project started from our mysterious and anonymous founder, Chef Nomi, who minted the contracts called Sushi, and everybody in the Ethereum ecosystem got wind of this new and fun protocol. So that's how I joined. I joined through Discord. Many others also joined on Discord in the first few days of the protocol launching and tried to contribute and help out any way we could.

I think, generally, the problem SushiSwap set out to solve was the issue of impermanent loss that is natural for AMMs, so automated market making decentralized exchanges. In order to solve this impermanent loss, SUSHI was minted as a token that introduced the concepts of yield farming so that people could take liquidity positions, stake them into what we call MasterChef contracts, and earn SUSHI. This allows for the proper incentivization and bootstrapping of certain markets, the attraction of liquidity, and also offsetting impermanent loss.

That's primarily how this, the problem Sushi solved, and the innovation that it brought through MasterChef. Over time, Sushi, because of its community, and we're a 50,000-member-strong community on Discord, has evolved into a wide ecosystem of different products and offerings.

Rayhaneh Sharif-Askary: So I have to ask, why did Chef Nomi come up with the name Sushi? Obviously, other than the fact that sushi is delicious.

Omakase: I think there are probably two reasons. From what I've heard, Chef Nomi used to work at a sushi restaurant, so that's probably some of the influence there, but SUSHI definitely followed the trend of food tokens. So the problem SUSHI set out to solve at the end of the day was not unique. There were other food tokens that preceded SUSHI. I guess the first one was YAM, and then so YAM created this ecosystem of yield farming and you had farmers, and then if you had farmers, you had food tokens, and SUSHI followed that trend.

YAM unfortunately, in their first days of launch, suffered, not an exploit, but a mistake in their contract that required everybody to pull their liquidity. So I guess SUSHI and other protocols similar to yield farming followed in its coattails.

Rayhaneh Sharif-Askary: So let's take a really big step back, and I really want to break it down for folks because I think some of this stuff is really complicated. So what exactly is SushiSwap and how does it work? Can you explain it to me like I'm five years old?

Omakase: Definitely. So I think at its core, Sushi is an automated market maker. So if you think about the exchange of any two assets, you need liquidity providers. Traditionally, on traditional exchanges, this involves people to put up a certain amount of assets. You also need market makers to come in and use sophisticated strategies to promote the trading and reduce the spread, et cetera. Automated market makers are a new technology, if you will, that essentially allows liquidity providers to provide liquidity for any two assets along an entire price curve, and this is defined by the classic equation, X times Y equals K.

So automated market making has been... These concepts have been around for some time. I would say Sushi and other decentralized exchanges follow more of a constant-function market making model, which means that if you have any two assets in a pool, X times Y is always K, and the composition of those assets change. And as the composition of those assets change, you can infer the price from this simple equation. Right? So if you wanted to find the price of X, it would just be X equals K divided by Y, and K is a constant.

So this allows for the creation of liquidity and the movement of two assets in almost an automated way, because all liquidity providers have to do is provide liquidity across this full range. It's completely passive, and it lowers the boundaries to, I guess, bootstrapping new markets. I guess, in this system, there's people who are doing swaps, people who are providing liquidity, and at the end, you also have people who arbitrage.

So because, I guess, the novel design of constant-function market making systems are that you don't really need to depend on outside price oracle, so the price can be inferred from this equation, X times Y equals K, and any derivations of that. But since there are assets all across the ecosystem that have their own oracles and have their own pricing, people can actually come in and arbitrage against the exchange, arbitrage against different centralized exchanges and also these automated market making systems. So this is what keeps the, I guess, price balanced in a sense, and it's really an entire ecosystem that's functioning together.

Rayhaneh Sharif-Askary: So for everyone's benefit on the call who just jumped in, oracles are bridges that take data from the outside world and bridge it back to smart contracts to allow them to run. And when we're saying oracles aren't needed here, Sushi has replaced oracles with something else that allows it to function without oracles.

Omakase: I think also, this is what Sushi has started off as, as an automated market making system. It's expanded to an entire suite of different primitives. I think this is the result of how large our community is. So our community has people from all different walks of life, all different kinds of backgrounds. So naturally, the platform and the demand for different products extends to different offerings.

So we have margin. We also have a launchpad. We have different incentivization mechanisms and systems, and all of these form what we call a DeFi ecosystem, because we essentially cover almost all primitives. So this is what Sushi has evolved into. I'm happy to discuss any recent developments that separate Sushi from the pack as well.

Rayhaneh Sharif-Askary: So I love analogies and I think there are probably people that aren't as familiar with DeFi as maybe some of us are on this call. Can you draw some analogies to what you guys are doing to how they're being done in traditional finance, whether it's traditional exchanges or Wall Street or whatever? I think that will help people better understand.

Omakase: Definitely. I think, if you go to Sushi's home page, and this was... The message was crafted by the community on sushi.com. It's, "Welcome home to DeFi. Start your home here." I think that has multiple implications. DeFi is basically decentralized finance. So essentially, every single financial primitive you see built on the centralized infrastructure of today, we're replicating on-chain, because at the end of the day, the blockchain is the fastest settlement layer.

So we have lots of controversies in the centralized world, such as Robinhood talking about T+3 versus T+1 settlement, but on blockchain, with different layer 2 protocols, it can essentially be T+0. So transactions are final, everything's open, everything's accessible, all the data is there, and it's basically a more accessible and almost equal platform, if you will. So essentially, what Sushi is trying to replicate, and I think the community is always pulling Sushi in all these different directions outside of just an AMM system, is essentially the replication of finance on-chain.

So if you think about different primitives that exist in financial ecosystems, exchanges, if you think about lending, borrowing, and margin, different kinds of derivative products, all of these have a space on-chain in a way where the infrastructure is much, much more efficient. And also, the infrastructure and ecosystem combines different players and incentivizes different players in a way. That comes together without the necessitation of custody or this centralized mechanism to basically direct and move everything.

So on SushiSwap, none of the liquidity belongs to us essentially. So we've bootstrapped $5 billion worth of liquidity on Ethereum, and all of these are different liquidity providers coming in and providing liquidity. They get the fees from the automated market making system and this whole ecosystem works together in tandem. So I think that's a high-level overview of what Sushi is, and I'm happy to talk about some community efforts as to where Sushi is probably progressing into.

Rayhaneh Sharif-Askary: Yeah. I think we should talk about that next. Before we do that, when you're saying bootstrap liquidity, what does that mean for a layperson?

Omakase: Sure. Sure. I think, so automated market making systems, we don't provide any liquidity. Right? So exchanges, they need liquidity, and there's a lot of people with various crypto assets sitting out there and they're passive. They don't generate any yield. They're not really usable. So basically, AMMs give all of these passive assets some accessibility and equality in creating liquidity pools. So anybody can create any kind of liquidity pool, and those liquidity pools, you can start to swap between those two assets.

When you swap between those two assets, the contract takes a fee and the fee is passed on directly to the liquidity providers. So in that case, you're making your assets more capital-efficient, whereas originally, you would just be sitting on various crypto assets and they wouldn't be necessarily generating any kind of yield for their users. So this is an open system, on-chain, completely accessible. Anybody can create a liquidity pool. Anyone can provide liquidity. And so, this is essentially the heart of what an automated market making system is.

Rayhaneh Sharif-Askary: So can you show us? I'm very visual. And whether if you want to show us the exchange, how people interact with it, or you talked about the equation, any of that, I think, would be really helpful for any other folks out there who are also visual learners.

Omakase: Sure. Give me one second.

Rayhaneh Sharif-Askary: You should have screen sharing abilities if I did this correctly.

Omakase: Great. Let me... Sorry, give me one second. Okay. Sorry, let me... Oops. So here is Sushi. At the end of the day, as we said, using an automated market making system, you can move in between any two tokens. You can also add liquidity to any two tokens. Sushi is also on various networks. So we're deployed primarily onto 14 main networks, but we've done 24 deployments so far. We're also doing four more deployments this month. A lot of these deployments are community-driven, and also, a lot of these different networks reach out to our community and there is governance around which networks that we proceed to.

So at Sushi, I guess the community has kind of decided that we are what we call chain-agnostic. We go wherever EVM compatibility exists. So EVM is the Ethereum Virtual Machine. So lots of these other networks are derivations of EVM, so we will automatically launch on them according to the deployment schedule that we've set up. We can switch to Ethereum, which is the most prominent network. Great. So at the end of the day, Sushi fundamentally is an AMM system. We also have liquidity provisioning. We also have migration tools, and we also have yield farms from MasterChef that incentivize different liquidity and bootstrap liquidity for different pairs.

We also have Kashi, which is the lending and borrowing protocol, and we also have staking, where users can stake SUSHI for xSUSHI. There are multiple various products and expansions. I would say Sushi and our community is the only protocol that's on the most networks. So community is number one to how Sushi evolves and grows. So we expand to as many networks as possible to grow our communities, because those communities on different networks have new users, et cetera, and they all join our community and all become part of this Sushi umbrella.

So that's essentially a quick demo of, I guess, how SushiSwap functions. You can add tokens to the token list. You can manage the token list. There's lots of assets that can become more capital-efficient over time.

Rayhaneh Sharif-Askary: Great. So let's talk about the SUSHI token.

Omakase: Mm-hmm.

Rayhaneh Sharif-Askary: There's a token. Why does it exist? What is it used for? What's a governance token? Can you walk us through all that?

Omakase: Definitely. I think SUSHI, fundamentally, the problem it was trying to solve was offsetting impermanent loss. But also, the secondary problem is conveying governance features through the token itself. So people use SUSHI to basically vote on the advancement and expansion of the protocol. I would say Sushi's governance is very product-focused. So almost all the products that have been released through SushiSwap have been through community proposals and community-driven. So some major initiatives such as Kashi, the Kashi platform, also the launchpad platform, and different mechanisms of the ecosystem have all been extended by the community.

There's also different protocol decisions that the community has brought up. So, for example, because the problem Sushi tried to solve was, "Okay, let's give out SUSHI rewards to offset impermanent loss." This mechanism was somewhat unsustainable in the beginning. Community members did propose that two-thirds of all the rewards generated should be locked up in order to reduce any downside to the Sushi ecosystem, and that was passed through governance, and large SUSHI holders voted, and it basically enacted this mechanism through governance.

I think this whole program has taken at least a year to complete, and there are various other protocols that we engage with that also participate in governance and participate in community expansion. So fundamentally, Sushi is a pathway to governance on-chain. I think these mechanisms are somewhat novel and have been driving DeFi, because if you think about it fundamentally, we don't basically control any of the liquidity. We don't control who swaps. We also don't control who arbitrages.

These are three distinct groups who have come together onto a protocol to interact with each other, and how they interact with each other and the rules that are set are through governance, because people can hold the SUSHI token and they can vote with it, and this basically drives the advancement and alteration and also basically tweaking certain economic factors of the protocol as well. So this is, I guess, Sushi's largest strength. I would say these are the largest strength of most DeFi protocols. And fundamentally, that strength is capturing network effects and expanding network effects, because the only way protocols have grown so large is because you have disparate parties that are getting together and making agreements through governance. Right?

Whereas fundamentally, if you tried to bootstrap the classic centralized mechanisms of these systems, in the real world, this would take a lot of time and a lot of liquidity and a lot of agreements and et cetera, whereas most of these things are basically embodied on-chain. Governance is embodied on-chain. Every vote is on Snapshot, and this is on-chain voting, et cetera, and these things will continue to last, because more and more community members and different parties that engage with the protocol will be able to have a voice in its direction, and I think that direction has taken Sushi far beyond what it was originally set out to solve.

Rayhaneh Sharif-Askary: So to take things back, a step back, if I'm an investor and I'm just getting into the space and I know about Bitcoin and Ethereum, trying to learn about new digital assets, how do I think about Sushi in that context? If I'm thinking about them and I'm thinking about Ethereum, Bitcoin, Litecoin, where does Sushi fit in in that context?

Omakase: Definitely. I would say most of these traditional tokens, like Ethereum, Litecoin, et cetera, they have a very specific purpose to essentially pay for the gas of those networks. So as the usage of the network increases, fundamentally, you would need to hold more and more of those tokens in order to pay the gas or transaction fees. SUSHI is different because SUSHI is fundamentally, at its core, a governance token. So as a governance token, you essentially hold the token to be able to vote on proposals and drive the protocol in certain directions.

And there are many different teams on Sushi. There are many different contributors. And also, there are many different institutions and also different groups, and they all have their own interests, and these interests are compromised and consolidated through voting, essentially, at the end of the day. So this is what makes, I guess, Sushi so dynamic. Chef Nomi, when he left SUSHI to the community, he left it all, the complete amounts of SUSHI to the community. So there's lots of different groups that hold SUSHI, and they all have its best interests at heart and they all have their different mechanisms and different methods.

And so, they will continue to interact with each other in a dynamic way and this will feed into the growth of the entire ecosystem. And I think, fundamentally, if we take a step back, these older tokens have a very specific mechanism, where tokens like SUSHI, the core mechanism is to capture and generate network effects. The only way you can basically bootstrap network effects is if you have some on-chain mechanism where different communities and different individuals all have access to this community through holding this token. And through that access, they can define and shape how this community develops.

Fundamentally, that's a very opaque concept, because most organizations are centralized, have a very strict hierarchy, and positioning as to what the road map is, et cetera, whereas at Sushi, it's incredibly dynamic, and that has only led to the incredible growth of the protocol and all of its feature sets. I would say the true image of decentralization is essentially how many features are being developed, because there's a lot of innovation happening in DeFi, and Sushi seems to capture a large majority of it. I would say that's essentially down to governance and people motivated to participate.

Rayhaneh Sharif-Askary: That's a really great explanation. Thank you.

David Grider: Hey, David here. Thanks a lot for that. I think that's a really good explanation on how you guys interact with Ethereum, being initially built on top of it. You guys are also expanding, as you mentioned, to some other networks. Right? And you talked about some of those. Maybe you could give us a little bit more context around that and how that works within the protocol.

Omakase: Sure. So lots of these networks, as I mentioned, are EVM-compatible. So that means there's very little changes in the Solidity code base to deploy onto those networks. Most of the difficulties are usually infrastructure-based. The purpose of deploying to as many networks as possible is, what we've found is that these networks don't cannibalize Ethereum. So I would say interactions on the blockchain still have major pain points that need to be solved, especially on Ethereum, major UX pain points such as gas, and also this whole concept of onboarding people through wallets.

These are two major UX challenges. I would say the plethora of new chains that are coming out addresses the primary issue of gas and transaction costs. And so, what we've found is that all these different chains, they have distinct user groups, and that probably highlights the fact that people actually using the blockchain for settlement purposes and for other efficiency purposes is actually quite small. Right? Maybe at most, throughout all chains, the maximum user group is around realistically 20 million users.

So for each chain, that kind of develops, and each chain has some additional mechanism to consensus that probably makes it slightly more efficient. Some chains are already on proof-of-stake, whereas Ethereum is slowly moving towards to that goal. On these different chains, there's new communities, and Sushi goes everywhere to build up our community and reach out to those communities. Essentially also, another interesting thing happens, which is, these chains also have their own native assets and they also have different types of assets that are unique to Ethereum.

So if you think about it, all of these chains are essentially new countries. And essentially, Ethereum is a new country, fundamentally. If you think about what a country is, it's a database of records. Right? And so, as a new country, they will create new entities, new projects, new primitives. And so, Sushi and our users and our community also demands exposure to that. So when Sushi goes to new chains, essentially, what we think we're doing is country-building, fundamentally. We're providing the initial incentives to attract liquidity. With the initial liquidity and financial primitives, you can start to do some very basic things. You can start to do swaps. You can start to do lending. You can start to do borrowing.

When you have these basic financial primitives, you can start to build interesting projects around it. So we think we're in the business of seeding countries in a sense, and our entire community is driven by this fundamental factor to grow this kind of decentralized platform and also these decentralized networks and propagate them. So that's essentially why we go on to so many chains. It's to basically establish the primitives for those chains. And eventually, as I said, Sushi is chain-agnostic. Eventually, all of this liquidity and all of these users, et cetera, can be consolidated through different mechanisms.

So as a community, when we go to all these different chains, we are setting up the success for these chains and giving them basic financial primitives in order to operate and have some usability, and then the next step would be to consolidate all of those users and consolidate all of that ecosystem into one interactive ecosystem. So it wouldn't be unlikely very near in the future that all chains can interact with the liquidity from all other chains.

And so, those users would never have to technically leave their own, quote, unquote, "country" in order to access liquidity from other markets. So that to us is pretty incredible that we can grow and our community can continue growing and exposing itself to new communities and incorporating them into the Sushi ecosystem. And fundamentally, that has economic effects as well.

David Grider: Yeah. I think you touched on probably what I think is the most important kind of aspect for thinking about what crypto is, which is, it gives the internet this sovereignty of being its own cloud economy, and it just lets people across the globe form whether they want to be the Ethereum cloud economy or the Avalanche cloud economy. And then you all, you obviously started your business in one place, which was Ethereum, and that business was on the financial application sector of delivering this function of being exchanged.

And you've expanded since and you've gone multinational, so to speak, right? And you've gone multinational to Avalanche and you've probably gone, whatever, and all these other chains to bridge across these different compatible cloud economies. Right? Europe has a similar legal system and infrastructure, and a European country could go across the EU or something like that.

And from that, you all have added from one service to many. Right? Now you have exchange, not just exchange, but you have lending and borrowing and yield farming, which, for folks, really means asset management, automated robo-advising in some ways, and that has made SushiSwap this global community-governed finance hub for this internet economy that's emerging. Is that one fair way to step back and frame it for folks?

Omakase: Yeah. I think that's a high-level overview of what Sushi is and where Sushi is going and what we've achieved. I think what will be incredibly powerful going forward is how to link the disparate liquidity on different chains to each other. Essentially, when Sushi goes to different chains, we're bootstrapping liquidity fresh, whereas eventually, I guess the community can also bootstrap all of the liquidity. When we move to other chains, those chains can also have exposure to the full set of liquidity that Sushi has already accumulated in all other places.

That will be very powerful, I guess, in terms of some sort of fractional reserve, later-day settlement kind of system, and this is essentially what Sushi is progressing into and that the community has mandated for through the expansion of multiple ecosystems and, as you said, David, multiple countries and going multinational essentially.

David Grider: Yeah. And I think to that, that is how the economics and the value of Sushi, at least in my view, is derived. Right? Sushi, obviously, is, it performs this service that users pay for and they'll pay fees for this access to liquidity or these different financial services, right? And part of that comes back to... Some portion of that gets paid to token holders who "stake," quote, unquote, which is agreeing to have some governance function of ownership. Right?

And that's, at least in a way, I think about it. Right? That fee... I mean, payment is a compelling reason for me to want to hold SUSHI, if I'm a holder. You probably also get some issuance of tokens as well and ownership of the program for interacting. And I'm not asking you to comment on the value of it at all, but the economics I'm explaining, is that correct?

Omakase: Generally, I mean, that's correct. I think most people also hold SUSHI tokens because they want to stay in governance. Right?

David Grider: Totally.

Omakase: And as the community becomes more dynamic and more expansive, more people want to stay. Right? And I would say the distribution of Sushi is actually quite decentralized, and that's the whole mechanism, that people have an interest to basically hold SUSHI tokens in order to participate in governance. And through that governance mechanism, they can define the road map and future for Sushi and also different parameters that they feel would benefit the protocol.

So in terms of governance, if not, we are probably the most active DeFi network in terms of governance. Right? If you go on Snapshot, we have the number one user group by far. That outranks all other protocols. And so, we think that governance is a required element. Right? It's not like a nice-to-have, because when we live in these decentralized times that are full of network effects, those network effects should only be promoted. And the promotion of those network effects come from using the token, using the SUSHI token to express your opinion, and that dynamic environment has continued to exist and thrive.

David Grider: Yeah. I mean, there's definitely a compelling reason, right? If you have this software entity that's governing all these economics, that you want to own it for that. Can you give us maybe any exciting updates of things that are maybe on the horizon for you guys? Obviously, no nonpublic information or anything, but what are you guys excited about going forward and things from today?

Omakase: Definitely. I mean, two announced exciting developments are Trident, which is... Trident represents the development, the community road map that's been developed for this past year. So six months ago, we released BentoBox, and BentoBox is what you would consider our decentralized application store. So it's essentially like an app store. You can put other decentralized applications on top of BentoBox, and it affords them various qualities.

So one of the qualities it's afforded is, it solves this token approval UX issue, whereas on every decentralized app you go to, you have to approve token and give the contract access to use the specific token. On BentoBox, one approve satisfies that for all the decentralized apps built on BentoBox. So it solves that crucial UX issue. The second more powerful feature is that BentoBox has the concept of virtualized balances. So all underlying balances deposited into BentoBox can essentially be used for yield generation purposes. So this makes those assets even more capital-efficient than they are.

So Trident is kind of the marriage between the classic AMM and BentoBox. So the constant product or constant-function market making system will be placed onto BentoBox in the form of Trident, and Trident, from our perspective, is essentially an AMM framework. So it can accommodate different pool types. So what I've described for, I guess, most of this session is constant-function market making systems. There's many different variants of that system out there, and those systems can all be incorporated into Trident without contract upgrades.

So that's exciting in the sense that we have this classic problem of impermanent loss for liquidity providers that will be further offset by the yields generated by BentoBox balances and strategies and then additionally offset by Sushi rewards. So essentially, liquidity providers have three levels of capital efficiency that they can use to offset this classical problem that's innate to automated market making systems.

We'll also be incorporating different types of automated market making systems on this Trident framework. So we'll start out with constant product and then also release different pool types as they come. That's somewhat exciting, because BentoBox also allows for us to connect all the other BentoBoxes together on different networks. So every network that we've been to, we've been deploying BentoBox as well. So once all of those AMMs go on those BentoBoxes, what you start to have is a fractional reserve system. Right? So you can access one BentoBox from one network and then access the liquidity and also the functionality of BentoBoxes on all other networks potentially.

So that's the power of marrying the AMM onto this decentralized app store, where all the app stores are kind of linked together in some way and have access to each other, whereas right now, contracts on one network can't really interact with contracts on different networks. The second announced item that the community has voted to, essentially expand into, is NFTs. So NFTs are an emerging interest, an interesting asset. And essentially, will be releasing an NFT platform named Shoyu. So this was the result of a community proposal, and there's lots of community builders helping on that initiative.

David Grider: When is that happening?

Omakase: That should be happening sometime within this month or sometime early next month, and then that NFT platform will essentially be the marriage, as we think, between DeFi and NFTs. So there's lots of interesting things you can do with NFTs. NFT primitives are still very, very young. Right? Mostly, what you can do with NFTs are buy and sell them and put them through different auction types. Shoyu will have all those mechanisms, but we want to marry basically these classic primitive concepts onto NFTs as well.

So these primitives can include swapping. Right? You would be able to swap different NFTs with each other. Lending, you could potentially use NFTs as collateral on lending. And also, there's many different mechanisms and there's also different minting functionalities that we'll come out with, because the NFT space right now is dominated by essentially four or five players, and the infrastructure definitely needs improvement and the primitives also need to be expanded. So what you can do with NFTs on Sushi will eventually be a wide array of actions.

David Grider: Can we just maybe all mute our notifications just for maybe the last few of the call on different apps? No. I mean, I think that's really exciting that you guys are... You've expanded to more products. You've expanded to more places. You're now expanding to different assets, like NFTs, or just the whole digital goods economy. That's huge, right? You're kind of like being digital eBay even to some degree as well. Right? I mean, well, not like that. You're connecting buyers, peer-to-peer. So is that what you're most excited about, or is there anything else that you're most excited about?

Omakase: Those two things are most exciting items. All of our code is also open-source and open-access. So anybody can... There's probably dozens of Twitter accounts that follow every commit by every community member. So there is no alpha, because everything is already there actively being built. There are some pool requests out for some new interfaces built by community members that should enhance basically this classic interface that you see. They will also introduce the concept of token pages. Right? That introduces each token, classifies them, and also, in the future, expands some standardization across tokens, because ultimately, at the end of the day, at Sushi, the entire community believes that the system should be open and accessible, but there should be some self-governance. Right?

So tokens should have some sort of standards that they should apply to, like where was it launched? Was it launched from a multisig, et cetera? Was it launched from an EOA account, et cetera? What are the security parameters of these tokens? Right? Do they follow any standard security guidelines that ensure the safety of these tokens, et cetera? So token pages will be the first effort to promote standardization and also discoverability and exploration.

David Grider: Well, so can anyone list a token on Sushi right now? But to get discovered at a better, higher page rank for like a Google, for example, it'll need to be on token pages? Is that maybe the way to think about it?

Omakase: So I think every token that will be launched will have its own token page, but immediately, the users can tell from the token page how developed the token page. Right? There will be certain parameters that it doesn't satisfy. So if the liquidity is too low, it might not even have a price feed. If the token doesn't have a multisig, then the multisig badge would be grayed out, for example.

So anybody, this system is completely accessible, but these token pages inform the community like, "Hey, how developed is this token? Does it satisfy the current standards of DeFi that we would expect?" as opposed to just being a random token just being out there in the ether. So all the contracts are accessible. So token pages and discoverability will be pretty key for our community.

David Grider: That's really exciting. Maybe we should move to some questions in the last 15 minutes, Ray?

Rayhaneh Sharif-Askary: Yup. Absolutely. Time flies. So there's a bunch of questions. I'm not going to get to them all. I will tackle the two that are meant for us quickly. "Does Grayscale have a SushiSwap product?" Yes, it's a component of our DeFi Fund, which is a diversified fund that gives investors access to the tokens associated with different DeFi protocols.

So another question about the DeFi Fund, "And what will be available beyond the accredited investor community?" So our private placements are only available to accredited investors. We have a product road map that involves taking the private placements and, well, after they've existed for a year, getting public quotations so that they become listed on the OTCQX, and that means that any investor anywhere in the world can buy them. There's no minimums. There's no holds.

And so, our hope and expectation for getting the public quotation hopefully for each of our products is a year from its inception. And this past summer, we launched the DeFi product. So hopefully, we're able to get a public quotation for next summer, but nothing is certain. So questions for the team. I saw this pop up a couple times. "Can you explain the difference between Sushi and Uniswap?"

Omakase: Sure. I would say Sushi was born out of Uniswap. They're both constant-function market making systems, but Sushi essentially has expanded far beyond just being an AMM. While Uniswap has focused on being an AMM and also focused on new types of AMMs in their Uniswap V3, Sushi has developed, and I think as a function of our community, into a whole different suite of products. Right? So we have lending. We have borrowing. Right? There's also launchpad. There's also incentivization mechanisms. There's also the concept of these token pages. Right? There's analytics.

We're on 24 different testnets and mainnet networks, whereas Uniswap is only primarily on two. And I think the largest differentiation in terms of the AMM subset is that we're moving the AMM onto BentoBox, and this, as I've explained, affords it lots of different and interesting functionalities. So underlying balances can accrue yield to offset impermanent loss passively. Trident, as I've mentioned, is more so an AMM framework that can be extended. So as new AMM innovations are created, you can add new AMMs to Trident and expand those pools and you can make them completely configurable, so pool creators can define what fees they want. They can also define what, essentially, curves they want for certain assets.

So I think all these different innovations have made us, quite frankly, a distinct product from Uniswap. While we're very supportive of Uniswap's innovations in the AMM space, particularly, we believe that Sushi is now a whole different ecosystem that's also driven largely by community efforts and also community direction. So why we've expanded so large and why almost everything we build has a network effect component on it, right? On BentoBox, the network effects get larger as more decentralized applications go into this BentoBox.

On Trident, Trident becomes more powerful as new pool types go into Trident. It's fundamentally because we're a community-driven protocol. So the demands for preserving those network effects and expanding those network effects are always top of mind for everything that the community proposes and architects. So this is fundamentally the key differences between us and Uniswap.

Rayhaneh Sharif-Askary: A couple of times, another question has popped up. Can you just go over again the difference between SushiSwap, the platform, SUSHI, the token, and xSUSHI? I'm seeing a few different questions pop up around that.

Omakase: So Sushi ecosystem comprises of different products. They're all open-access. Anybody can use them. Anyone who can even interact with the contracts can also use these products as well. SUSHI token serves essentially two purposes. One is to reward liquidity providers in order to offset impermanent loss, and there's also a whole host of utility for the SUSHI token these days as well. Right? You can collateralize it. You can also lend it out on Kashi and also different protocols. And also, different protocols have... For example, there's a new protocol, what they would describe as DeFi 2.0 protocols where you can deposit your SUSHI and they can act as liquidity providers for you.

xSUSHI is the staked version of SUSHI. So you can go on to our interface, take SUSHI, and basically deposit your SUSHI and stake it. xSUSHI is essentially a receipt of sorts. That SUSHI is locked in the xSUSHI vault and this affords you certain functionalities. So you can take xSUSHI and you can use it to vote on governance proposals. Up and coming on our grants platform, you can also use and stake xSUSHI in order to access different kind of grant styles, and then xSUSHI also accrues value from the AMM and all the various products.

So in every product we build, there's some component where value is derived back to xSUSHI. And so, on a high level, the ratio between xSUSHI and SUSHI is fundamentally increasing. So when you unstake xSUSHI, you can get technically more SUSHI back. And so, those are basically the three different mechanisms for the platform, the SUSHI token, and xSUSHI.

Rayhaneh Sharif-Askary: Okay. Great. I think we have to wrap. Thank you, Omakase. Thank you, Rachel, for getting on with us today. Thank you, David. Yes, this session is recorded. We'll distribute the recording. And as always, if you have questions, feel free to reach out to us, [email protected]. We're happy to answer anything that we can and help continue to help folks get educated. I hope that everyone has a great rest of their day and a great weekend.

Omakase: Great.

Rayhaneh Sharif-Askary: Bye, everyone.

Omakase:

Bye.

David Grider:

Bye, everyone.