SushiSwap, the AMM that's attracted over $750M in TVL in under 70 hours, is trying to dethrone @UniswapProtocol.

But will it work?

1/ Think of @SushiSwap as a Uniswap clone with 1 major difference.

Trading fees are split between liquidity providers (LPs) and holders of $SUSHI, instead of between LPs & equity holders.

2/ To earn $SUSHI, you provide liquidity to Uniswap for one of the select assets, then stake your LP tokens from Uniswap into Sushi.

The plan is after 2 weeks, Sushiswap will then migrate your Uniswap liquidity into their own dex, essentially forking Uniswap.

3/ Meanwhile, stakers earn $SUSHI tokens, which entitle them to a 0.05% tx fee for trades on Sushiswap.

The remaining 0.25% goes to liquidity providers.

This means @UniswapProtocol traders essentially pay the same fee (0.3%) on Sushi as they would on Uni.

4/ Say $SUSHI actually succeeds in forking at least part of Uniswap.

What does that look like?

Taking into consideration the fee split to $SUSHI holders, assuming the median P/S from @tokenterminal for the 6 major dex protocols, the following scenarios are possible.

5/ Obviously no one's *really* trading based on P/S today (just look at the range lol), but this is a starting point.

Token price is also highly sensitive to inflation. Feel free to play with the quick & dirty model below and lmk if anything's off.

https://docs.google.com/spreadsheets/d/1-juvA4pXxry2ViQxv9mHyGfaRSBjXcb1dWy4UBMdRq8/edit?usp=sharing

6/ Setting price and $SUSHI aside, the core idea of a liquidity migration is pretty interesting.

It reinforces my thesis that liquidity is a transient moat; the real moat is mindshare. Here, @UniswapProtocol is by *far* the strongest.

7/ But that also means this won't be the last token migration attempt.

Competitors see the fees Uniswap is generating and want a piece of the action.

Reminds me of Ethereum killers in 2017, but this time competitors are employing incentivized subversion.

8/ Key date to watch will be ~2 weeks from now, when $SUSHI incentives ratchet down.

My guess is that a lot of the capital will leave to greener pastures for farming, unless @SushiSwap can drastically differentiate its platform (besides token).

Why?

9/ When Sushiswap comes live, LPs are the ones receiving and likely holding most $SUSHI.

Fees are split between LPs and $SUSHI holders.

This means the end result may not be that different from current version of @UniswapProtocol (LPs earning most fees).

10/ To do a rug pull, @UniswapProtocol can also issue its own token for fee distribution.

My guess is most everyday users likely also prioritize a safe, battle tested product and are okay with progressive decentralization. But I've been wrong before.

11/ For the sake of the argument, I do think there are a few ways that liquidity migration could potentially work on forking some Uniswap liquidity:

- Vertical-specific feature differentiation
- Another product with traction

12/ There are a few "AMMs" that have material feature differentiation ( @BreederDodo), and could retain users obtained via incentivized migration.

Profitable Uni LPs probably won't give up fat fees to join a new AMM, so this will probably only work on thinly traded pairs first.

13/ What I would be more concerned about if I were Uniswap is if an existing product with material feature differentiation *and* significant growth + traction ( @BalancerLabs ?) tries to do this...

If you can earn comparable fees to be an LP and get paid extra to do it, why not?

Fin/ I'm curious about $SUSHI, but more excited about the idea behind liquidity migration.

This challenges my assumptions around first mover advantage, and highlights the fact that liquidity is not a moat.

AMMs will become highly competitive, and users will benefit.