Introduction

What is SushiSwap ?

SushiSwap is an automated market maker(AMM) protocol that works as a decentralized exchange. The trading is executed by smart contracts and it's liquidity pools play a major role in facilitating exchange.

A Liquidity pool is where users can become liquidity providers by locking (depositing) their assets into the contract. As an incentive, SushiSwap provides a liquidity pool token, (Sushi token in our case) using which the user can earn rewards in proportion of thier share in the pool.

The purpose of liquidity pools is to pool tokens (also known as liquidity) so that users can use them to make trades in a decentralized way. These liquidity pools are created by users and DApps (Decentralized Apps) who want to benefit from their usage.

Sushiswap on polygon

Sushiswap was initially deployed on the ethereum contract. However, after the voting, a decision to add it into polygon was made and so SushiSwap on polygon went live in the month of May 2021.

Analysis

Now, Lets start analysing the liquidity pools.

Number of pools

Our first step would be to determine the total number of pools on the polygon chain. So, We start with determining the total number of pools. A pool is considered only if there has ever been any transaction with it. Or in other words, if the USD contained in it is greater than 0.

So we can see that there are a total of 566 distinct pools that are deployed on polygon

TVL

TVL or "Total Value Locked" represents the total value of cryptocurrency "locked" in a smart contract. TVL is an important metric as it can directly affect the yields and usability of these applications for end users. For these applications in general, the higher the TVL, the better, as swaps will be more efficient and lending markets can more effectively supply liquidity to borrowers.

TVL is calculated as the total amount of US Dollars coming into a contract -(read as minus) total amount of US Dollars going out of the contract.

Now let us check which pools are among the top 10.

The largest pool appears to be USDC-WETH pool with the capacity to handle transactions worth 9 Billion US Dollars a year, with WMATIC-WETH and WMATIC-USDC pool coming a distant second and third respectively.

6 out of 10 pools deal with WETH, signifying that it is a very popular coin for trading.

7 out of 10 pools deal with stable coin pegged to US Dollars ( USDT,DAIand USDC ) indicating that they are amongst the most traded.

Takeaway

1. Stable coins such as USDC, USDT and DAI are amongst the most traded coins.
2. WETH is a popular choice to provide as liquidity.
3. Smart contracts and DEX are now able to handle billions of dollars worth transaction a year. So they cannot be ignored now as a fringe activity.
4. TITAN's coin had a very bad day, hence including it in our results might skew our analysis.

References and Further reading

1. About SushiSwap - https://academy.binance.com/en/articles/your-guide-to-sushiswap
2. Sushiswap on polygon - https://blog.polygon.technology/continuing-defi-summer-sushiswap-is-live-on-polygon-with-30m-usd-in-liquidity-rewards-b58c6dcc98a6/
3. TVL - https://impermax.medium.com/defi-explained-what-is-tvl-9800eda80b0b
4. Titan crash - https://cryptopotato.com/iron-finances-titan-token-crashes-to-0-in-a-sudden-defi-bank-run/

Well, things get stranger. It appears that a huge amount of money was deposited into the pool on a particular day and the 2 contracts have been relatively very silent since then.

Could there be a reason behind this. Well yes !! It can be obsevered that the peak occurs clost to 16 June 2021. This is the infamous day where Titan coin tanked from 64 USD a coin to almost 0 cents in a day. It could be possible that a huge number of people exchanged their TITAN tokens to something different say MATIC or IRON. If you would like to read more about the crash, I have included a link that i found useful.

Now that we know that analysing TITAN pools can be debatable. Let us exclude them from our analysis for now.

Hmm, It appears that around 99.6 % of the value is locked in only 2 pools or contracts, WMATIC-TITAN and TITAN-IRON Pool. Adding to that, 6 out of the top 10 pools too deal with TITAN token. How strange.

Special emphasis on TITAN pools

Strange isn't it ?. So let us analyse the trend of TITAN pools to get a better understanding of the pools.

Analysing liquidity pools other than TITAN

For the above mentioned reasons, we do not consider TITAN pools for this analysis. Nothing wrong with the pool per se, it's just that including them would overshadow all the other pools and we will ultimately fail to identify any trends.

Total value locked

TVL is calculated as the total amount of US Dollars coming into a contract -(read as minus) total amount of US Dollars going out of the contract.

The largest pool appears to be WBTC-WETH pool with close to 50 Million US Dollars, with USDC-WETH and USDC-DINO pool being very close.

7 out of 10 pools deal with WETH, signifying that it is a very popular coin for staking.

5 out of 10 pools deal with stable coin pegged to US Dollars ( USDT, DAI and USDC )

Volume

Volume can be said to be the total amount of US Dollars a contract processes in a given time. But why would that be important ? Well the liquidity provider makes a percentage on the swaps made, hence pools with a high volume translate to higher profits for the liquidity provider. A pool with high volume also signifies that the pool is an active one.

We can calculate the volume of the pool on different timescale, of which 1 day volume and 7 day volume are particularly popular. However, for our analysis we consider a 1 year volume to get a better overall picture of the pools.

Volume here is calculated as the amount of US Dollars into the contract +(read as summed with) amount of US Dollars out of the contract in the past 1 year.

Thank You for reading this. I would love to hear your feedback :)