Sushinomics : introducing oSushi

Context

There are currently no mechanics to control the emission of Sushi to liquidity pairs. With reward vesting removed we are seeing increased selling pressure for SUSHI, making yield less attractive for liquidity providers.

History

Sushi started with Discord voting to decide which pairs should receive incentives and moved into a more opaque model decided by the core team. There are two problems: 1) emission has limited quid pro quo in terms of fees vs emission, and 2) Sushi is submerged by Onsen listing requests.

Solution

We believe that curve.finance, through its veCRV token, has built one of the best token designs in the space for emission based projects.

Following veCRV and DILL from pickle.finance to direct emissions, we propose SushiSwap deploys oSushi (OnsenSushi), developed by Curve, myself, and Pickle team, and having been audited 4 times across 3 different firms.

oSushi can be used as a minimum pre-requisite for projects to stake oSushi to be come eligible for voting gauges on the onsen interface.

Once available, oSushi can be used to vote weights, replacing current allocation points. Weights define emission for each individual LP position (technically not LP, but any tokenized position)

Summary

  • Lock SUSHI between 1 month to 4 years to receive oSushi

  • oSushi becomes non-transferable and non-tradeable

  • Can be unlocked with a penalty of 50%, which will be distributed to xSushi stakers.

  • 1 oSushi = 1 vote

  • Minimum (to be defined) oSushi staked allows projects LP tokens to appear on onsen autonomously

  • Voting on Onsen allocations will happen every week, allocating a portion of emissions across all liquidity pairs on SushiSwap and potentially Kashi/cross-chain SushiSwap iterations in the future

  • Once you vote, your vote will remain directed at pools unless modified

  • Users will have the ability to change their votes every week and will be able to allocate their oSushi to different pools

  • oSushi allows the user to control Sushi emissions across all ecosystem products in the future

  • oSushi increases emission from a base factor of 0.4 to a max of 2.5x, the more oSushi you stake, the more Sushi you earn

Benefits

  • Teams will be incentivized to run Miso auctions asking for Sushi so they can lock a high amount of oSushi at launch and provide high liquidity pairs right at launch or market-buy Sushi lock them for incentives.

  • Whales will be required to stop selling their entire Sushi emission otherwise their earnings are slowly eroded to 0.

  • Community members holding oSushi expose themselves to tokens airdrop so they can delegate voting powers to new entrants. (EPS on BSC, or FROYO on Fantom)

  • Projects who held their Sushi - xSushi and have been part of the Onsen benefits by retaining their emissions.

  • Yield Aggregators will build up positions in oSushi so they can maintain or achieve the highest yield for their communities.

Napkin Math

Current Onsen 230 pairs in total since launch assuming an average locking of Sushi per project around 750k$ worth of Sushi at current market price * 12.75$ = 58k Sushi * 200 = 11M Sushi potentially converted into oSushi. Taxing the current emissions and erasing the ⅔ unlock.

Authors

  • Andre Cronje
  • 0xMaki

Resources

UI sample
Implementation contracts

  • oSushi is the wei
  • Revisit the sushinomics

0 voters

oSushi locked for 1+ year should be staked into xSushi and earning yield too.

  • Yes
  • No

0 voters

21 Likes

Thanks Andre and Maki for your time and brainstorming to come up with this innovative sushinomic proposal. Congrats Maki again for keep thinking restless on new ways to add value for Sushi/xSushi.

4 Likes

oSushi locked for 1+ year should be staked into xSushi and earning yield too.

This is key. Like Curve and their veCRV model, Sushiswap needs to align those who provide liquidity with the success of the platform. Otherwise, the LPs will just remain mercenaries who will leave as soon as there is a better farm.

One could even question the benefit of having both xSushi and oSushi. Why not just allow the locking of xSushi to get votes/emission increase?

xSushi is tradeable and usable as a collateral, while the idea of oSushi is to give voting rights and locking SUSHI on the long term to avoid selling pressure on SUSHI and more commitment to the protocol. That’s how I understand it.

6 Likes

I then would believe that yearn is ready to deploy a similar vault to the yveCRV and yvBOOST, just on Sushiswap, that would make me cry of joy!!!

2 Likes

Given recent emissions on Polygon, would it make sense to deploy oSushi there too?

1 Like

this is a great idea

1 Like

I’m supportive of the proposal. It brings much needed transparency to the Onsen process.

Only this concerns me. Sushi has built a brand, and I believe projects in Onsen benefit from Sushi’s brand equity, almost as a quasi endorsement. I could not be understanding what is meant by autonomously here, but I hope we consider any risks this might create in terms of what type of project can show up in Onsen.

1 Like

I think it’s a good suggestion.

But, I do have one concern. Investors, specific project owners, aggregators who own large amounts of SUSHI will be able to manipulate rewards to their own advantage, making it unfair.

For smaller projects without funds will find it difficult to launch and scale it on MISO cuz they can not provide additional rewards for new entrants.

Thanks,

3 Likes

The beauty of this proposal is o-sushi is a more polite way of calling sushi in Japanese :slight_smile:

2 Likes

this is a very good point.

also I’m a little confused, is all new SUSHI that is emitted automatically locked into oSushi for at least 1 month? Or is it instead that all new SUSHI that is emitted has to be manually locked into oSushi?

1 Like

Not sure what you mean by unfair. It’s certainly not fair to sushi holders when protocols use onsen to scale and then immediately dump sushi rewards on the market as soon as it is convenient for them. As a long term sushi holder, I’m ecstatic about the chance to align incentives of sushi owners and protocols receiving sushi rewards. That is fair for sushi. Of course there will be winners and losers for any strategy, but sushi is in a competitive market and must focus on its own growth and relationships in defi ecosystem.

2 Likes

This is just another band-aid. We’re trying to build something big here, so we need to focus on the main SUSHI token instead of continuing to fragment the ecosystem. If the protocol wants to keep changing the tokenomics, perhaps transitioning to an upgradable SUSHI token is the more permanent solution. Governance is already hard enough, so having multiple tokens in one system will confuse new users.

If people believe that users are mining SUSHI and just dumping, then maybe we need to reflect on how many SUSHI the protocol is giving versus the liquidity it is getting. The team has been deciding how many allocation points go to each pool for most of the protocol’s life. I think it is time for the voters to decide how many points each pool gets.

1 Like

I like how curve works, which is the inspiration for oSUSHI, but it has become very difficult for small positions to really participate in the votes and proposals. Every vote is an Ethereum TX and pretty expensive, so only whales really participate.
So the good thing in that model is you have real skin in the game, the bad part is that it is not cost effective unless you have a very sizable position.

Also, it would become very confusing to have oSUSHI and xSUSHI. How do you explain the difference to any newcomer?
I think there should be just one derivative token (either oSUSHI or xSUSHI) that both accumulates rewards and is used for this voting purpose. You could either choose to lock it (get voting power) or not (you still accumulate rewards).

4 Likes

A lock in period that extends beyond the end of Sushi block emissions would seem unreasonable.

Doesn’t that essentially end in 2023?

1 Like

Agree with the general idea of the proposal.
However, for sake of simplicity we should limit ourselves to 2 tokens. Not 3. Should be easy to implement.

1 Like
2 Likes

I love the idea! I do agree with some other people’s comments about merging oSUSHI and xSUSHI. Instead of having 2 tokens, simply apply a sliding scale revenue share based upon the amount of time you lock your SUSHI. Something like 25% weight for 3 months locking, sliding to 100% weight for 1 year locking.

1 Like

There is another aspect: xSUSHI can be used as Collateral for loans (AAVE, Kashi, etc). We should not loose that capability.

2 Likes