The Evolution: SushiSwap to sushi.com

In recent weeks, the global fear of the rising interest rates and new covid variant have generally slowed the price rise of "risk-on" assets, with the majority of well-known DeFi tokens plunging by more than 50%. The media focuses on price the most, but DeFi activities have remained relatively unaffected. DeFi's total value locked (TVL) has remained stable, hovering at $245 billion, or just around 6% below its all-time high.

However, the momentum of the decentralized exchange (DEX) volumes appears to have lagged behind other explosive DeFi activities. Monthly DEX volumes have soared from $56 billion at the beginning of 2021 to an all-time high of $144 billion in May, and have remained below its previous all-time-high since June. With the overall DeFi TVL increasing by around 260% since May, why hasn't DEX volumes proportionally increased?

Given that DEXs takes up a smaller percentage of the DeFi TVL, have the valuations of DEXs, notably the top two market leaders, Uniswap and Sushiswap, changed in any way? At the time of writing, the fully-diluted valuation of Uniswap and Sushiswap are $15.0 billion and $1.4 billion respectively, a huge valuation gap of 10.9x. Over the last 365 days, Sushiswap handled $162 billion in cumulative volume, while Uniswap handled $646 billion, a 4x larger volume. Based on liquidity provider (LP) fees collected by each platform, Price-to-sales (P/S) ratios of Uniswap and Sushiswap are 10.0 and 2.8, respectively. This indicates that as compared to Sushiswap, investors give Uniswap 3.6x greater value for the same amount of LP fees collected. This might be because investors regard Uniswap as having lower long-term risk in maintaining the market share when compared to Sushiswap's expansionary strategy into other product lines. Below, we investigate further whether the current valuations are fair and how much should Sushi’s new product line contribute to its valuation.

Sushi.com: Overview

Sushi began as a contentious fork of Uniswap in August 2020, launching a vampire attack that successfully hijacked $1 billion of Uniswap liquidity in less than a week. Sushi was running hot, capturing over 9% of total DEX trading volumes in its first month, until the pseudonymous founder Chef Nomi sold the entire development fund for 38,000 ETH (approximately $14 million at that time). Following pressure from the community, Chef Nomi returned all the funds back to the community in the following week. Sushi had many setbacks in the beginning, but it has evolved into a community-driven protocol that is now expanding beyond the confines of an AMM-only platform.