Summary

This proposal aims to significantly evolve Sushi by adopting a Labs model, thereby restructuring our current organization to enhance operational efficiency and accelerate protocol development. The empowerment and evolution of Sushi Labs, sponsored and supported by Sushi DAO, is envisioned to lead our venture into a new era of competitiveness in the decentralized finance (DeFi) space. This initiative will empower us with the agility to innovate and expand our product offerings, ultimately increasing the value and utility of the Sushi ecosystem for all Sushi holders.

Introduction: The Need for Evolution

The DeFi landscape, users' expectations, and market complexity are constantly evolving. Sushi remains at the forefront of this innovative wave. Yet, governance procedures, while essential for security and asset management, currently need more flexibility to increase our development pace. The current industry landscape presents new challenges that require retooling our existing governance and organizational structures to respond faster to market demands and user requirements.

Our current challenges include:

• Slower response to market changes due to cumbersome governance.

• Reduced development pace from funding issues tied to bureaucratic processes.

• Difficulty attracting and retaining talent due to an opaque organizational structure.

The issues outlined in this proposal are not uniquely Sushi issues but are symptomatic of a broader industry trend. They underscore the need for a strategic overhaul to sustain and enhance our competitive edge. Adopting a Labs model, employed by other successful industry leaders, will provide the agility, focus, and resources needed to overcome these challenges.

Vision and Objectives

The Sushi DAO aims to position Sushi as a top DEX across major chains through Sushi Labs, focusing on innovative products, structured operations, and the following core growth pillars:

• Sushi Labs will drive innovative product development, delivering value to xSushi and the Treasury through airdrops and increased fees.

• Governance will receive updates to outline the responsibility of the Sushi DAO and Sushi Labs, allowing both to operate more efficiently.

• Provide for continuity of leadership and operations team contributors to support Sushi Labs in its enhanced capacity to build new products and services.

Implementation Specifications

Sushi Labs

Sushi Labs is an autonomous administrative, technical, and operational company, or group of companies, tasked with product development and management within the Sushi ecosystem. While it aligns with the DAO's strategic objectives, Sushi Labs operates autonomously, making decisions without direct oversight from the DAO. It has a specialized team, distinct from the DAO, with a clear focus on projects like the Susa Perps DEX to promote ecosystem growth and navigate resource management challenges efficiently.

It's important to emphasize that Sushi’s DAO model should transition to primarily decentralized on-chain governance to ensure clarity and maintain the organization's intended structure, avoiding hierarchical positions like 'Head Chef' that can concentrate responsibility and decision-making power. The vision is for the DAO to operate with a flat structure, focusing on asset and resource management. Token holders can vote on Treasury allocations without delving into operational specifics, especially those unrelated to broader strategic decisions.

In line with this vision, upon successfully implementing this proposal, Jared's current Head Chef role will transition to focus exclusively on advancing Sushi Labs. This separation highlights our stance that Sushi DAO shall not participate in operational decisions involving Sushi Labs, including hiring or firing. By clarifying these boundaries, we aim to cultivate a more autonomous and efficient ecosystem, ensuring that Sushi remains at the forefront of innovation and community-driven governance.

Sushi Labs Development & Initiative Focus

Sushi Labs needs continuous app maintenance, Discord support, marketing efforts, network grants, deployments, and business development. The goal is to expand product offerings and adopt a franchised DEX model through external developer partnerships. Likewise, enhancing outsourcing, partnerships, or acquisitions is vital to strengthening the app.

• SushiSwap

  • Aggregator

  • Limit Orders

  • xSwap

  • Bonds

  • V4 Hooks Strategy

• Susa

  • A fully on-chain order book perps DEX, powered by Layer N.

• Franchised DEXs

  • Plan for franchise DEXs to scale + grow the Sushi Community

  • Non-EVM specific focus but not exclusive of EVM opportunities that will benefit Sushi’s network scaling efforts

• LaunchPad + CL Position Management

  • Continued support of Steer

  • Partnership w/ focused Launchpad and v3 fair launch position construction

• Integrators

  • Strategy around integration into other apps/platforms

    • Fee-share from using our RouteProcessor infrastructure & API

• Network Grants

  • A continued partnership focus around network reward programs

    • Arb, Op, etc.

• Support Team

  • The team will continue comprehensive support through Discord with focus attention on continued improvement of the overall user support and troubleshooting experience

  • Enhancing the Sushi Community experience & involvement

    • Sushi Wizards (UX Bounty Program)

    • Trading Competitions

    • Sushi NFT Loyalty Program & Rewards

• Marketing

  • Continue ongoing brand messaging to promote Sushi’s product ecosystem

    • Product marketing campaigns

      • Develop product campaigns to strengthen every stage of the market funnel

    • Content Marketing

      • Creation of high-quality content like blog posts, articles, and educational videos to establish thought leadership

    • Social Media Engagement

      • Participate in crypto-related communities on Twitter, Reddit, Telegram, and Discord to build awareness & credibility

    • PR

      • Continued on-going brand reputation management

      • Promotion of product releases through targeted PR campaigns

    • Partnerships & Integrations

      • Collaborate with projects, businesses, or platforms to increase visibility and credibility within the crypto ecosystem

    • Ecosystem

      • To maintain awareness, promote, and explain the Sushi product ecosystem to: users, media, and the general crypto public

    • Franchised DEXs

      • Marketing initiatives will promote the synergy between the core Sushi DEX and its franchised DEX partners to build maximal value

    • Susa

      • Promote the perpetual DEX product to build value in the perps vertical, which has growth potential

Franchised DEXs

The franchise DEX model will deploy native DEXs on select high-value networks. Newly launched Sushi Labs-powered franchised DEXs will launch a native token customized to the needs of its respective network community. The initiative aims to enhance xSushi holder value through airdrops and farming rewards, with a portion of revenue supporting the Sushi DAO treasury. This strategic move seeks to harness various blockchain strengths, boost Sushi’s ecosystem participation and investment, and establish a scalable decentralized finance model.

Value Propositions

• Diversification and Risk Mitigation: Operating across multiple blockchains reduces reliance on any ecosystem, tapping into diverse user bases and liquidity pools.

• Enhanced Revenue Streams: New revenue sources from trading fees and liquidity rewards, with a share allocated to the Sushi DAO treasury, support ecosystem sustainability and innovation.

• Increased xSUSHI Holder Value: Direct rewards from franchise DEX performance foster long-term investment and align holder interests with the ecosystem's success.

• Strategic Market Expansion: Initial launches on various blockchains position Sushi advantageously in the multi-chain landscape, aiming for early market and user capture.

• Community & Ecosystem Growth: Franchise DEX launches promote community expansion, deeper blockchain ecosystem integration, and collaborative growth.

• Innovation & Adaptability: The model empowers each DEX to customize offerings, ensuring agility and long-term relevance.

• Sustainable Growth: Sushi’s routing and aggregation engine, Route Processor, will allow swappers to reap the benefits of franchised DEX liquidity when using Sushi.com.

• Acquisitions: The Labs will seek out new technologies to incorporate into the Sushi Ecosystem and look to boost the overall user experience.

Sushi Labs will execute the franchise model, leveraging technical expertise and industry relationships. Franchised DEXs will launch with the support of select network communities and build value through synergistic goals. Strategic partnerships with leading networks will enhance launch visibility and adoption and foster mutual growth and collaboration.

Grant and Budget Specifics

We request that Sushi DAO award a grant of 25 million Sushi tokens to Sushi Labs, including assets from the Arbitrum airdrop, business development, and partner grants, Kanpai 2.0, Sushi 2.0, rewards, stablecoins, and "Sushi House" funds. Sushi Labs will be the sole beneficiary of future airdrops awarded to Sushi by protocols and partners. This grant will bolster Sushi Labs' competitive edge against rivals like Uniswap and 1inch by enabling Sushi Labs to attract and support top talent and development standards. It aims to sustain Sushi's product ecosystem with new DEX services and develop a multi-token ecosystem.

Deployment of Treasury Assets for Sushi Labs

Organization & Legal

The Sushi DAO previously approved a snapshot to create a baseline legal entity structure. As needs evolve, it becomes paramount to update the organizational structure. Securing competent legal guidance is also crucial for effectively representing Sushi's global presence. This proposal includes further organizational and legal updates to support the DAO and Sushi Labs:

• Enact further organizational structures, which include:

  • Upgrade the work initially performed by Fenwick

    • The Fenwick model provided a structured base for the DAO to add liability protections for stakeholders and contributors. Further legal guidance has clarified the need to increase these protections and streamline operational continuity via a more robust organizational structure

  • Incorporate in-house legal counsel via Gresham International

    • Adding in-house counsel will provide ongoing support for the DAO and Labs to operate with necessary legal guidance for operational continuity

  • Expand and include relevant licensing to support global operations

    • For example, VASP and other relevant licensing in applicable jurisdictions

As the market continues to mature and provide clarity on digital assets, the DAO and Labs will benefit from a proper, scalable, and multi-jurisdictional approach to its organization. This proposal will enact the necessary steps to provide lasting protections for the DAO and Labs.

Governance

We believe that the current governance structure employed by Sushi can benefit from updates, and we suggest enacting the following terms without delay to support this proposal:

1. The Sushi DAO will oversee governance regulating the Treasury and token supply changes.

2. The Sushi DAO will implement on-chain governance mechanisms via SushiPowah for council elections.

3. The Sushi DAO will empower Sushi Labs with exhaustive and sole operational responsibility for core product development.

Proposals

Governance will center around properly structured formal definitions for adherence. Below is the outline for formal definitions:

• SIPs

  • Sushi Improvement Proposals (SIPs) are similar to Ethereum Improvement Proposals (EIPs). This process aims to ensure that changes to Sushi are transparent and well-governed. An SIP is a design document that provides information to the Sushi community about a proposed system change. SIPs will initially cover modifications to token supply, voting, or governance changes.

• SCCPs

  • Sushi Configuration Change Proposals are to make a case for modifying one of the existing system configuration variables. The intent is to provide a clear and detailed history behind each configuration change and its implementation rationale. SCCPs will initially cover adjustments beyond the floor emission rate and other -ve configuration changes.

• STPs

  • Sushi Treasury Proposals outline a proposed Treasury allocation of assets, including funding grant programs, additional initiatives outside of Labs, and other Treasury allocation strategies.

Oversight

• The formation of councils will mirror the Synthetix model, establishing an official Sushi DAO treasury for grants and bounties. This system will rely on councils to distribute and evaluate applications rather than on token voting.

• We will transition to a delegated voting system and a multi-chain method for council elections, which will resemble a representative government structure.

• Meta-governance establishment will make use of future treasury grants.

Council Formation

• Sushi High Kitchen

  • Treasury multi-sig members, execution of all treasury enacted proposals

• Treasury Council

  • Treasury management

    • Guidance and strategies for the use of treasury funds

• Grants Council

  • Vetting of grant applicants

  • Formation and procurement of initiative bounties

  • Competition prizes

• Ambassador Council

  • Promoting Sushi’s interest throughout DeFi

Synthetix's model inspires Sushi’s council model. While Synthetix uses several councils, the whole model may be excessive initially. We propose starting with a High Kitchen council and gradually adding more councils as the strategic need arises.

Council Selection

• SushiPowah weights remain allocated according to similar historical guidelines, with a quadratic weighting now applied to their voting power. In the future, SIPS may provide additions to various forms or locations of Sushi. Vote casting will remain via Snapshot or a future on-chain Governance module. SushiPowah will serve as the source of influence in council elections.

• The Council then has a one-vote-per-member allocation, where SIPs, SCCPs, and STPs receive votes based on each council member's single vote. The High Kitchen will initially be the only council to vote on proposals, with additional consideration for the other councils potentially participating.

Tokenomics

Sushi Labs will implement a thorough tokenomics overhaul on behalf of the Sushi DAO. The revisions will include a singular mint of 25M tokens granted to Sushi Labs and the introduction of a 1.5% APR (baseline) to bolster liquidity, incentivize participation, and fortify the Treasury. We will introduce gauges to facilitate a transition to on-chain emission curation. Any project integrated with Sushi AMMs will become eligible to benefit from the gauges. Sushi Labs will abstain from leveraging its Sushi token allotment for voting purposes within these gauges.

Sushi Emissions

1. 1.5% APR breakdown:

   1. 10% Treasury Payout - hardcoded in MasterChef

   2. 90% Liquidity Pool Curation - pool incentives / gauges

Mechanics

Deploy a tokenomics periphery system, enhancing basic fee collection and multi-chain interactions to leverage our v2 and v3 infrastructure developed through the Sushi 2.0 initiative.

Breakdown of Protocol Fee Percentages:

• Protocol Fee

  • 70% to xSushi

  • 20% to Sushi Labs

  • 10% to Treasury

• Swap / Plugin Fee (if enacted)

  • 70% to Sushi Labs

    • Up to 10% allocated for referral program

  • 20% to xSushi

  • 10% to Treasury

Gauges Implementation

• Network Specific Gauges

  • Network-specific gauges provide top-level curation for directing emissions to various chains.

• Local Level Gauges

  • Sushi exists on various networks, where its presence promotes local network curation from the allocated network emissions directed to that chain.

Disclosures

Sushi Labs will release quarterly and annual reports to the DAO via the upcoming governance dashboard so the DAO can stay informed of Sushi Labs' progress and developments.

Engineering Progress

Despite funding and staffing challenges, the Sushi Engineering team has earned noteworthy credibility by consistently developing critical infrastructure and products. Their contributions place Sushi's GitHub among the top 10 most active organizational GitHubs in the crypto industry for the past 12 months. You can find a list of the Sushi team’s achievements below:

Network Scaling - V2 & V3 AMM Push

• On April 1st, 2023, Uniswap’s V3 AMM license became an open-source model, which we then deployed to 30 EVM networks.

• Additionally, we completed our first non-EVM deployment, which included Aptos in the Sushi network ecosystem.

Tech Debt Reduction

• Tech debt reduction required the engineering team to allocate significant resources. To appropriately allocate resources, we deprecated several products, including Kashi, Miso, Shoyu, and Trident, which required an outsized maintenance effort from the team.

• Additionally, the UI has been worked on extensively with several major ports to make the codebase more modular and easier to scale. Wagmi's introduction was the most extensive overhaul, providing immense benefits to the app that will be majorly beneficial through additional scaling and UI upgrades.

Route Processor Upgrades & Aggregator Infrastructure Push

• RouteProcessor was born, and Sushi's transition to becoming one of the best aggregators on the market has been a significant milestone. RouteProcessor started with primary support of Sushi-specific pools, including v2, v3, and Trident AMM pools.

• With our latest upgrade, RouteProcessor4, we can aggregate all major dex types, including v2, v3 (Pancake, Uniswap, Algebra), and Curve.

• Additionally, Sushi now supports fee-on-transfer tokens through our latest RouteProcessor upgrade.

• Additionally, supporting infrastructure has been enhanced to process and compute hundreds of routes per second. Keeping state across a wide range of DEXs, Sushi offers aggregation support across more than 30 networks, with access to 99% of tokens on the EVM markets.

SushiXSwapV2

• We released version 2.0 of SushiXSwap in the fall of 2023. It takes a more modular approach to the cross-chain swap infrastructure, allowing us to expand support for all messaging layers, new and old, through our adapter system.

• With seven networks supported with our LayerZero adapter, cross-chain swaps have shown a strong product market fit via our alpha version of our cross-chain swap.

Multichain App

• Sushi 2.0 started by releasing our first multi-chain application, which incorporated all the EVM networks we had deployed into a single interface. Viewing pools and browsing analytics does not require network switching.

• The infrastructure allows us to continue the multi-chain push and provides a cohesive app for all EVM networks in a single application for our users.

Sushi Bonds

• The launch of Sushi Bonds has incorporated an additional tool/incentive mechanism into our application that token projects can use to build liquidity depth for their pools.

Token List Management

• We introduced a partner portal to enhance Sushi's ability to keep up with the growing ecosystem and launch new tokens. Projects can now easily upload logos and whitelist tokens, as shown on our UI.

• We integrated GoPlus for fee-on-transfer simulation to improve users' UX during the swap experience. This improved UX prompts users to increase the slippage on FoT tokens instead of constantly dealing with error messages.

Smart Pools

• Partnership with Steer and integration into our app introduced Sushi Smart Pools to our user base. Smart Pools are managed liquidity optimization strategies for one-click deployment into pools without worrying about keeping up and adjusting the ranges of v3 liquidity pool positions.

Merkl V3 Rewards Integration

• Integrating Angle’s Merkl V3 Rewards system into our UI allows for non-staking v3 liquidity incentivization, removing many of the barriers and unfriendly UX that came with the MasterChef and V2 reward systems. Merkl also provides for advanced incentivization so that projects can incentivize their intended liquidity depths.

Sushi Academy

• The introduction and continued content production for Sushi Academy will allow users to learn more about operating on-chain and using Sushi’s products.

Galaxe Trading Campaigns

• Many Galaxe trading campaigns have been run, with many NFTs collected by users throughout each campaign.

Furo Stream

• We developed a best-in-class public good for DAOs and Web 3 projects that offers audited token streaming and vesting.

Governance Dashboard

• The governance dashboard will debut in Q2 '24 and provide comprehensive insights for monitoring the performance of DAO grants, treasury diversification, and snapshots.

Conclusion: A Call to Action for Transformation

We stand at an exciting and pivotal moment in Sushi's history, with the opportunity to redefine our future and solidify Sushi as an industry leader. The Sushi DAO empowers Sushi Labs to maximize stakeholder value and ensure vibrant ecosystem growth by supporting this proposal.