Jared Grey, CEO of decentralized exchange SushiSwap, has introduced a proposal to redesign the tokenomics of the SushiSwap token (SUSHI). The new model, which was unveiled in the SushiSwap forum on December 30, aims to boost liquidity and decentralization on the platform, as well as strengthen the company’s treasury reserves to ensure its ongoing operation and development.
Under the proposed model, liquidity providers (LPs) would receive 0.05% of swap fee revenue, with higher volume pools receiving a larger share. LPs would also have the option to lock their liquidity in order to earn boosted, emissions-based rewards. However, these rewards would be forfeited and burned if they are removed before they mature.
Staked SUSHI (xSUSHI) will not receive any share of the fee revenue, but will be eligible for emissions-based rewards paid in SUSHI tokens. The size of these rewards will be determined by time-lock tiers, with longer time locks resulting in larger rewards. While withdrawals before the maturity of these time locks are permitted, the associated rewards will be forfeited and burned.
In addition to these changes, the decentralized exchange will use a variable percentage of its 0.05% swap fee to buy back and burn SUSHI tokens. The exact percentage will depend on the total time-lock tiers selected. As the proposal explains, “because time locks get paid after maturity, but burns happen in ‘real-time’ when a large amount of collateral gets unstaked before maturity, it has a sizable deflationary effect on supply.”
The proposed tokenomics redesign comes after SushiSwap revealed that it had less than 1.5 years of runway left in its treasury, indicating that a significant deficit was threatening the exchange’s long-term viability. SushiSwap has reportedly suffered a loss of $30 million over the past 12 months due to incentives for LPs, leading the company to consider a new tokenomics model.