Build Sushichain To Connect Liquidity Across Chains

Proposal: Create an all-encompassing Sushichain that connects liquidity of Sushiswap DEXes across multiple chains as well as supports trades on non-EVM native assets such as Bitcoin, DOT, SOL, ZEC, etc.

Recently, there has been much discussion about creating a Sushichain that connects Sushi liquidity across different chains (https://twitter.com/FUTURE_FUND_/status/1398794597917024257). Currently, Sushi liquidity looks like this:

ETH- $3.4 Billion https://analytics.sushi.com/
Polygon- $921 Million https://analytics-polygon.sushi.com/
Fantom $54 Million https://analytics-ftm.sushi.com/

Other chains where smaller amounts of liquidity are deployed are BSC, HECO, xDai, Harmony, Avalanche, and OKExChain.

A Sushichain would help solve the problem of fragmented liquidity as well as give Sushi a foot in a multichain world. Right now IMO, it would make the most sense to build Sushichain on Tendermint since that is already live, but I’m open to hearing other options.

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If there’s a possibility to bring Bitcoin to DeFi on Sushi it would be the greatest competitive advantage one could ever dream of.
Really excited about this proposal, would to hear more about it.

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Thanks for posting a formal proposal of this Dave. As the dude that proposed the original idea in this tweet: https://twitter.com/samkazemian/status/1398793319350640644

I was thinking the simplest technical implementation to create this for SUSHI is simply to fork/modify part of Thorchain’s codebase and replace $RUNE with $SUSHI. This allows SUSHI to be the endogenous asset of Sushichain and secure the routing liquidity of pairs on Sushichain to Sushiswaps many implementations.

Frax Finance, our project, would love to help out to build this together and incorporate it by incentivizing FRAX pairs on this cross chain liquidity system. Sushi is in such a good place to take over the cross chain liquidity routing space that admittedly Thorchain innovated. But Thorchain has so build up the brand, single sided liquidity, and many pairs that Sushiswap already has and enjoys due to its incredible hard work since DeFi summer. It would be very smart and value accretive to take this advantage and leap from everyone into this idea imo. We can lend a helping hand at Frax Finance and also be one of the first stablecoin projects to utilize such tech!

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How easy/difficult would it be to fork ThorChain though?

I think this is a great proposal.

Creating a standalone chain could for many reasons be strategically useful for Sushi, but just want to point out that Sushi right now already has cross-chain support, through Ren, for free. And Sushi has it in a way where it isn’t losing composability with the DeFi ecosystems on each chain, as you would get from spinning up your own chain. You can trade non-EVM assets like BTC, DOGE, ZEC, FIL etc on Sushi on Ethereum, BSC, Polygon and Fantom right now, and Ren is adding support for Solana, Arbitrum, and Avalance this month, and has a bunch of Polkadot Parachains bridges ready for when those launch on mainnet, and releasing token bridges between all of those smart-contract chains next month ish.

Composability is the big elephant in the room that the Thorchain shillers avoid bringing up, because it’s the existential risk to that kind of model ever succeeding, and is why they are attempting to build their own DeFi ecosystem on Thorchain itself, because it will never practically integrate with the rest of DeFi as it from a technical standpoint can’t. But trying to build your own competing DeFi ecosystem as the solution to that problem is a foolish endeavor as you are competing with tens of thousands of other developers freely building on whichever chains they prefer.

The reason lack of cross-chain composability is a problem and will likely remain so is because each chain runs its own security, so as a cross-chain protocol, you need to enforce block confirmation thresholds, otherwise it is trivially easy for a sophisticated attacker to double-spend and drain all of your liquidity. And this means waiting time, which means you can’t stack protocols together like lego blocks anymore, and worse UX.

A standalone Sushichain could in that sense become more isolated from DeFi, not more integrated. And it is by no means a straightforward task building safe and stable cross-chain bridges, saying that from experience. It should def be considered whether the necessary amount of resources that needs to be spent on trying to launch such a platform (and that could fail), would have much more efficient results building tighter UIs leveraging already live bridges that provenly work. Imho Sushi would get more TVL and volume that way.

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Strengthening the integration with RenVM is the clear choice.

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Agree, the work has already been done. Resources would be better spent integrating RenVM than reinventing the wheel.

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I agree with Max.
RenVM is ready. It is safe and stable.

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From a user POV jumping from one chain to another each time with a different dapp is definitely not cool and gets tiring. Bad UX. And I don’t see how creating yet another stand-alone chain helps with this situation…

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Well said, a RenVM integration sounds very much appropriate for this proposal. Plus, soon there will be a Ren Community Fund based on darknodes revenus. If accepted through a vote from the Ren darknode holders, such an integration could be funded.

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Why not build on the work others have done? Thorchain already works for short tail assets. Why not collaborate with them for long tail assets where Sushi has a clear competitive advantage? Like Sushi, Thorchain is also a community-led grass-roots project with really talented developers and a passionate community. It shares the exact same ethos as Sushi: serving its community members instead of VCs and elites. I think working together and having divide/conquer approach might serve the larger cause better than forking and fragmenting communities and antagonizing against each other.

I agree with Max regarding the Ren system and disagree with the Thorchain community.

The technical merits are more sound.

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Sushi’s emergent approach is to build a great holistic ecosystem for LPs across different EVM environments. With UniV3 forking away from pure-XYK to price-bound liquidity, it seems Sushi is the AMM to own the pure-XYK space, so focus should be on pulling this string.

Some questions to ask:

  • Sushi is currently using other providers to port liquidity between chains. Can Sushi control its own destiny here?
  • Sushi liquidity is fragmented between different environments. With more L2s arriving, does this mean Sushi liquidity is fragmented even further? Can a Sushichain coalesce the liquidity?
  • As an app-specific chain, what is the niche to focus on? Long-tail or short-tail?

Here could be some answers:

  • Sushichain manages and secures the flow of liquidity between chains
  • Sushichain abstracts the liquidity on each chain, creating one giant liquidity pool for each pair, instead of fragmented liquidity
  • Sushichain focuses on long-tail assets

What could be the infra to achieve this? As Max pointed out, THORChain is not cross-chain composable, and doesn’t seek to be. It wants to vertically-integrate and own the full DeFi stack on its own chain. RenVM is good at wrapping non-EVM assets on EVM chains, but this is not relevant to the vision posed above.

THORChain is also very state-intensive, due to having the burden of interfacing many different chains.

Perhaps Sushichain is this:

  • A fork of AnySwap with some modifications to achieve decentralisation (Anyswap is a good candidate since it is a EVM-specific solution)
  • $Sushi as the node bond, with incentives loosely coupled to ensure bondedAssets > securedAssets
  • Abstracted liquidity to coalesce fragmented pairs into giant liquidity pools (eg the ETH-USDT pool is the sum of all the ETH-USDT pools on each chain, sushichain is able to manage liquidity as a whole in response to demand)
  • Focus on long-tail assets by ditching GG21 TSS and using Chainflip EDDSA sig aggregation (faster and can be async)

Alternatively, perhaps Sushichain is a bit too ambitious. In which case, happy to work with the sushi team to combine Sushi’s long-tail assets (and also solve THORChain composability):

  • sushiRouter.swap(chain1.asset1, chain2.asset1, destinationAddress)
    → swap from chain1.asset1 to chain1.asset0 (eg ETH.ETH) on sushiswap-ETH
    → swap from chain1.asset0 to chain2.asset0 (eg BSC.ETH) on THORChain
    → swap from chain2.asset0 to chain2.asset1 on sushiswap-BSC

This is possible today with a small modification to the THORChain router, since each outbound is actually a smart contract call.

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Agreed with this. It does not make sense for Sushi to fork Thorchain. There are many security considerations to tackle if this were the case, and I don’t believe there is much benefit vs the cost of making this happen. With that said, I think (as suggested) a sushichain with a shared security model (like an app-specific L2) would be a much better approach while gaining the same benefits of 1-hop cross-chain trades. This could be done with the Polygon SDK. An alternative could be building directly on top of Connext, but I am less clear on the details of how this would work.

Alternatively, perhaps Sushichain is a bit too ambitious. In which case, happy to work with the sushi team to combine Sushi’s long-tail assets (and also solve THORChain composability)

I would also support this. Splitting territory of EVM → Sushi and non-EVM → Thorchain would be a good compromise as well.

Actually, in addition to wrapping non-EVM (and in a month, EVM) assets, RenVM can call smart contracts directly when minting, which is all Sushi needs to transition from multi-chain to cross-chain.

For an ETH <> SOL swap, for example, Sushi could use RenJS to generate an Ethereum gateway address for ETH, mint and swap renETH for SOL in Sushi on Solana under the hood, and send that SOL to the nominated Solana address, all in one Ethereum transaction. The user simply sends ETH and receives SOL, as pictured below. Curve does this for native BTC <> WBTC, totaling almost $2b in the last year and $20m in the last 5 hours.

That would make Sushi a cross-chain, fully composable AMM with entirely native assets.

That composability would then enable 0Confirmation to build a Sushi adapter for native BTC swaps through Sushi in 2 minutes. In the future, RenVM smart contracts will let Sushi aggregate its own DEXs on any combination of chains and split liquidity between them as part of the same swap.

Screen Shot 2021-06-01 at 7.49.36 PM

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this is would be amazing - great idea!

This process is a long one. I hope you can achieve this. This will affect the price of sushi very positively.