Sushi cryptocurrencies have been mentioned increasingly in the world of decentralized finance recently, so I decided to explain everything you need to know in one place.
Together we’ll look at what Sushi actually is, how it works, and most importantly – how you can earn money with it.
What is Sushi (SushiSwap)?
Sushi, officially named SushiSwap, is a decentralized exchange, often referred to in the crypto world as a DEX (decentralized exchange). This means it’s a platform where you can exchange (trade using the term “swap”) one cryptocurrency for another without needing a traditional exchange, bank, or any middleman. It’s actually an entire multi-chain DeFi hub where, in addition to exchanging cryptocurrencies, you can also provide liquidity and earn rewards on dozens of different blockchain networks.
Before we go further, let me explain some basic terms that will appear frequently in this article:
- Blockchain is a kind of digital ledger where all cryptocurrency transactions are recorded. This ledger is not stored in one place but on thousands of computers around the world, making it extremely difficult to change or counterfeit anything.
- DeFi (decentralized finance) is a general term for financial services (lending, trading, saving) that operate without banks or other traditional institutions, but rather through smart contracts on the blockchain.
- Smart contract is simply computer code that automatically executes a certain action when certain conditions are met. For example, when you exchange one cryptocurrency for another, the smart contract automatically ensures you receive the correct amount.
- Wallet is an application or device with which you store your cryptocurrencies and connect to platforms like Sushi. The most well-known are MetaMask, Trust Wallet, and Phantom.
So Sushi is not a company in the traditional sense, but a community of users that manages the platform through a so-called governance token named SUSHI. Holders of this token can vote on how the platform develops.
If you’re looking for a link to the platform itself, you can find it at sushi.com. I use Sushi primarily as a supplementary tool alongside the fundamental knowledge that I explain in detail in my free crypto e-book, where I’ve compiled everything beginners need to know in one place, based on all my years of working with cryptocurrencies.
How does the Sushi exchange work?
Unlike traditional exchanges where buyers and sellers wait for their orders to match (called an “order book” system), Sushi operates on a completely different principle called AMM (automated market maker).
What does this mean in practice? Instead of waiting for another user who wants to sell exactly the cryptocurrency you want to buy, on Sushi you trade directly with a liquidity pool. A liquidity pool is simply a “collection” of two cryptocurrencies that users have deposited into it. When you exchange one currency for another, it happens directly from this pool, and the price is calculated automatically based on a mathematical formula.
Sushi is a community-governed platform that operates on more than forty different blockchains, including Ethereum, Arbitrum, Polygon, BNB Chain, Base, and Optimism. This means you can trade on practically any major chain without having to use multiple different platforms.
In addition to basic cryptocurrency exchange, Sushi also offers:
- SushiXSwap – a tool that allows you to exchange cryptocurrencies between different chains (for example from Ethereum to Polygon), without having to use separate “bridges”.
- Kashi – a marketplace for lending and borrowing cryptocurrencies.
- BentoBox – a kind of shared vault that increases the efficiency of invested capital usage.
For a beginner, it’s most important to understand three things: swap, providing liquidity, and staking. I’ll discuss all three in what follows, as these are also the three main ways you can actually earn with Sushi.
How to earn with Sushi cryptocurrencies – three practical ways
Now we get to the part that interests you most. So how do you actually earn with Sushi? Below I’ll present three main paths that users use most frequently, ordered from simplest to most complex.
1. Trading (cryptocurrency exchange)
The most basic way is simply trading – buying cryptocurrencies when they’re cheaper and selling when they’re more expensive. On Sushi you do this by connecting your wallet, selecting the cryptocurrencies you want to exchange, and confirming the transaction.
It’s important that you understand the concept of price slippage. This is the difference between the price you see before confirmation and the actual price at which the transaction is executed. This happens because the price in the liquidity pool changes depending on how many people are trading at the same time. With smaller transactions, slippage is usually negligible, but with larger ones it’s worth monitoring.
Every transaction on blockchain also requires a so-called gas fee (transaction fee). This is the amount you pay to the network (not to the Sushi platform) to process your transaction. Fees vary depending on which chain you use – some have lower fees, others higher.
2. Providing Liquidity
Another way to earn is to become part of the liquidity pool I mentioned above. You do this by depositing two cryptocurrencies into a specific pool of equal value (for example, ETH and SUSHI). In return for enabling other users to trade, you receive a portion of the fees that these users pay with each swap.
This is an interesting way to earn passive income, but beginners must also understand the risk called impermanent loss. This occurs when the price of one of the two deposited cryptocurrencies changes significantly relative to the other – in such a case, the value of your share in the pool could be lower than if you had simply held the cryptocurrencies in your wallet. That’s why I recommend entering liquidity pools only when you have a solid understanding of the basics – which I explain in detail in my free crypto e-book.
3. Staking SUSHI Tokens (xSUSHI)
The third and, in my opinion, most interesting way for beginners is staking, or “locking up” cryptocurrency for the purpose of earning rewards. At Sushi, this works through the so-called Sushi Bar mechanism.
Here’s how it works: You deposit (lock) SUSHI tokens into a smart contract called Sushi Bar, and in return you receive a new token called xSUSHI. Simply holding SUSHI in your wallet doesn’t generate returns – to earn passive income, you must actively deposit SUSHI into the Sushi Bar smart contract. In return, you receive xSUSHI tokens, which increase in value over time relative to SUSHI, as a portion of all trading fees on the platform continuously flow back into the xSUSHI pool.
In simple terms: As long as you hold xSUSHI, its value gradually increases because the platform “feeds” a portion of earnings from all transactions happening on Sushi into it. Whenever you want, you can swap xSUSHI back to SUSHI (along with accumulated returns).
This staking method is the primary way to earn on the platform – users lock their SUSHI tokens and receive xSUSHI tokens, which increase in value over time and provide users with a steady source of passive income. Additionally, holders of xSUSHI gain voting rights on future platform decisions, which is an added benefit if you’re interested in project governance, not just earnings.
How to Get Started – Step by Step
Now that you understand the basic concepts, I’ll show you how to actually take your first steps on Sushi. The process is actually quite simple once you do it the first time.
- Install a crypto wallet. I recommend MetaMask or a similar wallet that supports Ethereum and other chains where Sushi operates. I explain the entire setup process and security tips in detail in my free crypto e-book.
- Transfer some cryptocurrency to your wallet. For starters, I recommend a smaller amount so you can familiarize yourself with the platform before investing a larger sum.
- Visit the Sushi platform at sushi.com and click the wallet connection button (in the top right corner of the page).
- Select the chain you want to work on. Sushi allows you to choose between Ethereum and many other chains – select the one where you already have funds.
- Choose the “Trade” or “Swap” option if you want to simply exchange cryptocurrency, or “Positions” if you’re interested in providing liquidity, or “Stake” if you want to lock up SUSHI for xSUSHI and start earning passive income.
- Enter the amount, review the transaction details (including the fee and any price slippage) and confirm in your wallet.
The key is to make your first transaction with a small amount so you can familiarize yourself with the entire process before deciding on a larger investment.
Decentralized Exchange (DEX) or Traditional Exchange (CEX) – What’s Better for a Beginner?
Before we continue, I think it makes sense to clarify the difference between a DEX platform like Sushi and a CEX platform (centralized exchange), such as Coinbase or Binance, as this question comes up very often with beginners.
With a centralized exchange (CEX), you register with an email address, verify your identity, and then deposit money into an account managed by the company. The company holds cryptocurrencies on your behalf and conducts trading. The advantage is ease of use, but the disadvantage is that your funds aren’t entirely under your control – if the company faces issues, it can affect your funds as well.
On a decentralized exchange like Sushi, you don’t register with an email address; instead, you simply connect your wallet. Your funds remain in your possession at all times, and trading occurs directly through smart contracts, without an intermediary. This means more freedom and privacy, but also more personal responsibility – if you lose access to your wallet (for example, if you lose your “seed phrase,” which is a series of words that serves as a backup for your wallet), no one can access your funds, not even you.
My advice for complete beginners is to first learn the basics on a smaller exchange, and then gradually move on to using decentralized platforms like Sushi when you feel ready to take complete control of your cryptocurrencies. I explain the entire transition process and all the details that beginners are most often afraid of in my free crypto e-book.
Common mistakes beginners make on Sushi (and how to avoid them)
In working with cryptocurrencies, I’ve noticed that beginners tend to make the same mistakes repeatedly. Let me list some of the most common ones so you can avoid them.
Investing too large an amount at the beginning. I understand the desire to earn quickly, but I recommend that you first familiarize yourself with the platform using a smaller amount. Once you understand how trading, liquidity provision, and staking work, you can gradually increase your investment.
Investing in liquidity pools without understanding impermanent loss. I’ve already discussed this above – it’s one of the concepts that beginners most often overlook, and then they’re surprised why the value of their investment is different from what they expected.
Storing your seed phrase in the wrong place. A seed phrase is a series of words you receive when creating a wallet and serves as the only way to restore access if you lose your device or forget your password. Never store it in email, in a note on your phone, or anywhere else where someone else could see it. Write it down on paper and store it in a safe, physical location.
Clicking on suspicious links. Unfortunately, in the world of cryptocurrencies, there are many scam attempts where someone tries to convince you to click on a link and enter your seed phrase. A legitimate platform like Sushi will never ask for your seed phrase – if someone is asking for it, it’s almost certainly a scam attempt.
I cover all of these mistakes and much more in detail in my free crypto e-book, where in addition to the basics, I also explain how to recognize and avoid the most common pitfalls in the world of cryptocurrencies.
Advantages and disadvantages of the Sushi platform
To give you a complete picture, let me briefly mention where Sushi stands out and where it might lag slightly behind the competition.
Advantages:
- Broad support for more than forty different chains, which means more trading options in one place.
- A real share of the platform’s revenue for those who stake SUSHI (through xSUSHI).
- The ability to participate in decisions about the platform’s future (governance).
- Advanced features like SushiXSwap for cross-chain swaps without additional bridges.
Disadvantages or things to be aware of:
Sushi lags behind some competitors like Uniswap and PancakeSwap in terms of total value locked and liquidity depth for certain cryptocurrency pairs. In practice, this means that for some less popular cryptocurrencies, price slippage can be larger, so it makes sense to check liquidity before making a larger transaction.
Frequently asked questions about Sushi
Do I need a lot of money to get started? No. On Sushi, you can start with a very small amount, as there is no minimum investment. However, I recommend that you first test the platform with a smaller sum before deciding to invest a larger amount.
What’s the difference between Sushi and a traditional exchange like Coinbase? On a traditional (centralized) exchange, a company holds your funds; on Sushi, your funds remain in your own wallet at all times – you are the only one who has control over them. This brings more responsibility, but also more freedom.
Can I lose money with xSUSHI? The value of xSUSHI is tied to SUSHI and the general state of the crypto market, so like all cryptocurrencies, its value can also decline. Earnings from fees are an additional return on your investment, not a guarantee that the investment value will never fall.
Can I use Sushi in Slovenia? Yes, Sushi is a global decentralized platform that you can access from anywhere, including Slovenia, as you only need an internet connection and a crypto wallet to use it.
What happens if I send funds to the wrong chain? This is one of the most common beginner mistakes. Before you perform a transaction, always double-check that you have the correct chain selected in your wallet (for example, Ethereum or Polygon), as funds sent to the wrong chain could, in the worst case, become inaccessible. That’s why in my free crypto e-book I explain how to safely execute transactions between chains.
Conclusion
Sushi offers one of the most comprehensive approaches to decentralized trading and earning with cryptocurrencies that you can currently find on the market. Whether you’re interested in simple trading, providing liquidity, or staking for passive income through xSUSHI, Sushi is a platform worth trying once you understand the basic concepts I’ve explained in this article.
I always recommend that you don’t venture into the world of cryptocurrencies without a solid foundation of knowledge. That’s why I’ve prepared my free crypto e-book, in which I’ve put together everything you need in one place, in clear language, for a confident and thoughtful start to earning with cryptocurrencies. If you want to deepen your knowledge and avoid the most common beginner mistakes, I invite you to check it out.
Thank you for reading the article to the end. If you have any questions about Sushi or cryptocurrencies in general, feel free to write to me anytime – I’m happy to help you on your crypto journey.
