SushiSwap is a multichain decentralized exchange (DEX): swap to get another token, or supply a pool to earn trading fees. If you want to hold your tokens, leave them in your wallet; if you want to trade or fund a supported pair, choose SushiSwap to use its automated market maker (AMM).
What Does SushiSwap Do With Your Tokens?
An AMM lets you trade against a liquidity pool instead of waiting for another person to accept your order. A pool holds two tokens; its pricing formula changes the exchange rate as traders take one token out and put the other in. People who supply those tokens own a share of the pool and receive a share of its trading fees.
Your wallet holds the tokens until you approve a transaction, and the trade or deposit happens on a blockchain network. Check both the network and the token’s contract address: a familiar token name alone does not identify the asset. A normal swap uses tokens on the same network, so moving assets between networks is a separate step that can add cost and time.
Which Network and Swap Quote Should You Choose?
Choose a network where you already hold the input token, can receive the output token, and have enough of that network’s native token to pay gas. Gas pays for the blockchain transaction and changes with network demand. If you hold assets on Polygon, for example, compare a Polygon quote before paying to move them elsewhere.
Judge a swap by the amount you expect to receive after the pool’s trading fee and price impact, then account for gas. Price impact is the change your trade causes in the pool’s rate; it tends to grow when a trade is large relative to the pool’s liquidity. For example, if you swap $1,000 worth of one dollar-pegged token for another, receive a quote worth $993, and pay $2 in gas, the illustrated total cost is about $9.
Slippage is different: it is a change in the quoted rate before your transaction executes. A maximum slippage setting limits how much change you accept, but setting it higher does not improve the price. Before confirming, check the token addresses, expected output, minimum output and gas estimate in your wallet and quote.
When Providing Liquidity Makes Sense
Providing liquidity makes sense if you want to hold both tokens and think your share of trading fees can compensate for the risks. Compare pools by trading activity, available liquidity and fee tier, rather than treating a displayed annual return as a promise. A pool with little trading may collect little in fees even if its stated fee rate is high.
Pool design also matters. In a full-range pool, your tokens remain available across the pool’s prices; concentrated liquidity puts them within a price range you choose. A narrower range can earn more fees while trades occur inside it, but an out-of-range position stops earning trading fees and can end up holding mostly one token.
As the tokens’ relative prices change, the pool adjusts how much of each you own. This can leave you with less value than simply holding both tokens, a difference called impermanent loss; fees may or may not cover it. For a first transaction, decide whether you need a token exchange or ongoing exposure to a pair, then check the live swap quote or pool terms before approving it.