SushiSwap: What It Is, How It Works, and Why It Matters in DeFi

When you trade crypto without a bank or middleman, you’re likely using something like SushiSwap, a decentralized exchange that lets users swap tokens directly from their wallets using smart contracts. Also known as Sushi, it’s one of the earliest and most influential decentralized exchanges built on Ethereum. Unlike traditional platforms like Coinbase or Binance, SushiSwap doesn’t hold your money. Instead, it runs on code—specifically, AMM algorithms, mathematical formulas that set prices based on how much of each token is locked in a liquidity pool. This means there’s no order book. No human trader. Just pools of tokens and automated pricing.

SushiSwap started as a fork of Uniswap, but it added a twist: it gave users a share of trading fees through its native token, SUSHI. That made it one of the first DeFi projects to truly reward its community—not just as users, but as stakeholders. Over time, it expanded beyond swaps to include lending, staking, and even yield farming. But at its core, it still relies on liquidity pools, reserves of token pairs like ETH/USDC that enable instant trades. If you want to trade rare tokens, you need someone to put up the other side of the trade. That’s where liquidity providers come in. They earn fees, but they also take on risk—like impermanent loss—when prices swing wildly.

Today, SushiSwap isn’t the biggest DEX anymore. But it’s still widely used, especially for trading tokens that aren’t listed on major exchanges. Its tools are simple, its interface is clean, and its community is active. You’ll find posts here about how it compares to other platforms, why some tokens only trade there, and how its fee structure affects your trades. You’ll also see real examples of what happens when liquidity dries up—or when a new token floods in. Whether you’re swapping ETH for a new memecoin or trying to understand how price discovery works on-chain, SushiSwap is a live lab for DeFi mechanics. What you’ll find below are deep dives into its inner workings, real user experiences, and warnings about risks you might not see on the surface.