Sushiswap Migration Drains Uniswap’s Liquidity!


We reported about Sushiswap in last week’s DeFi update. The platform is a Uniswap fork, using a token to incentivize its users to move their liquidity from Uniswap to Sushiswap. The liquidity migration was originally intended to occur around block number 10,850,000, which would have coincided around Friday or Saturday. But things have dramatically changed since then.

After Sushiswap founder “Chef Nomi” sold all of his SUSHI tokens for ETH, he handed over control of the platform to the CEO of FTX Sam Bankman-Fried (SBF). The latter then fixed the beginning of the migration phase to September the 8th at 16:10 CET.

SBF explained the migration plan in a lengthy twitter post. A test pahse will be rolled out first to ensure a smooth migration. The first trading pair to be moved was ETH/CRV. Should all work out well, the remaining liquidity will be migrated pool after pool from Uniswap. At the end of the migration, control of the project will be handed over to SUSHI token holders through a multisig.

Migration underway

Uniswap statistics make it clear that the migration is fully underway. Uniswap’s total locked value has decreased by over 70% in the last few hours.

Uniswap liquidity drained
Uniswap liquidity drastically decreasing

The image shows the boom in Uniswap’s liquidity following the release of 2.0. The liquidity of the trading pools kept improving for months. Then the sudden crash after Sushiswap announced the liquidity migration. The liquidity exodus probably hasn’t reached its end yet, and a happy ending for Uniswap looks more unrealistic with away every passing hour.

There is however some remaining hope for Uniswap. Once the migration ends and all SUSHI tokens have been distributed to users, economic incentives might force people back to Uniswap. After all Uniswap pays out 0.05% higher fees to non-token holders (0.3% vs 0.25%). Meanwhile SUSHI coin holders can passively earn 0.05% of the Sushiswap fees without participating with their own liquidity, and keep their assets on Uniswap where they will earn an additional 0.3%. Therefore, even SUSHI holders might prefer to migrate their liquidity back to Uniswap.

For people looking to swap their coins, both platforms cost the exact same fees. They will use whatever DEX has the highest liquidity, and hence the lowest slippage. It remains very exciting to watch the quick developments in the Uniswap/Sushiswap saga. The upcoming days and weeks will show us how it ends.

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