A Sushi Community Memo — Introducing Sushi Labs

Let's Recap

Hello, frens. The past few months for the Sushi DAO and operations team have been exciting, frustrating, dramatic, and, ultimately, successful for the future of Sushi. I understand that some people in and outside of the Sushi community have questions about the recent developments stemming from the successful implementation of the Burū no Shinka proposal, which established Sushi Labs, among several items, and earmarked a significant grant for its operation–Sushi Labs aims to build and maintain a multi-token ecosystem for the Sushi DAO. Hopefully, this memo will provide a satisfactory high-level overview of our strategy.

As is typically the case with significant fundamental change, the potential for misunderstanding and distractions to its core logic can hijack the benefits that it presents. Let me provide some background for context: for most of my first year as Head Chef, I spent much time working on restructuring and bringing order to a fragmented organization instead of having the time to focus on building value for stakeholders. When I joined, Sushi Swap had nearly exhausted its token emissions, its Treasury was anemic, and it had operational bloat, much of which resulted from a highly ambitious product roadmap during the previous market cycle.

Products like Kashi, Bento Box, Trident, SushiXSwap, and initiatives like tokenomics upgrades require dedicated teams and robust budgets, which the Sushi Treasury could no longer afford. It was essential to prioritize the core AMM offering, reduce expenses, implement temporary operational streams with Kanpai 2.0, secure grants and bolster runway, rethink tokenomics mechanics from the ground up, and establish a solid fundamental technology and economic base to allow Sushi an opportunity to rekindle its position as a market leader. Ultimately, we succeeded in many of these goals and fell short in some.

During this time, we developed Route Processor, our swap and aggregation engine that is now the most widely distributed in the industry. Since emissions were ending, it was essential to prioritize Route Processor so Sushi could expand its liquidity access via aggregation and support its users with better swaps, maintaining and attracting new users. Route Processor, in many ways, has been the most significant product success for Sushi since MasterChef. Route Processor ver 5 is in audit and will continue growing in market utility and value for Sushi users.

Many attribute Sushi's stagnated growth and AMM liquidity issues to LPs migrating to other DEXs and seeking better yield. However, with our newly established organizational structure, sufficient budget, and leveraging successful products like Route Processor, we have the tools to enhance liquidity on the Sushi DEX, boosting key metrics such as volume and yield for stakeholders. In the rest of this memo, I outline our plan to achieve this goal and how you can support our efforts and help Sushi thrive.

Why Sushi Matters

Sushi began as an experiment in community ownership and remains committed to this principle. While some may be concerned that establishing Sushi Labs could compromise this ethos, a dedicated development firm, unencumbered by political coercion, will provide continuity in core product strategy and offer the best opportunity for long-term success. Effective coordination is vital for rapid execution, a challenge often faced by DAOs. While Sushi has secured high-caliber talent, the DAO's profound control over product strategy and development has periodically hindered its ability to deliver the greatest return.

Since its inception, Sushi has embodied the core principles of DeFi and the passionate beliefs of its contributors in blockchain technology, community, and unrestricted financial access. The Sushi experiment has produced widely used tools, like MasterChef, and inspired a generation of projects with its innovative liquidity farming methodology and infrastructure. These beliefs and innovations have created a more competitive, fairer, and accessible marketplace. Our team aims to revitalize that original spirit with a matured structure, emphasizing the best aspects of Sushi's past while alleviating previous burdens. Sushi matters because it will continue to build open-source software benefiting all protocols and communities.

Progressing Governance

Drawing inspiration from leading DeFi projects and insights from our governance challenges, we proposed the Burū no Shinka restructuring plan to implement a council structure similar to Synthetix's. This framework includes four councils:

1. Sushi High Kitchen: Comprising treasury multi-sig members, this council will execute all treasury-enacted proposals.
2. Treasury Council: Focused on treasury management, guidance, and strategies for Treasury fund use.
3. Grants Council: Responsible for vetting grant applicants, forming initiative bounties, and awarding competition prizes.
4. Ambassador Council: Promotes Sushi's interests throughout DeFi.

These councils empower the community to manage resources effectively, leveraging Sushi Labs' efforts and protocol yield; you can find more information concerning the councils and the upcoming elections here.

The council structure also manages assets while mitigating the impact of hostile DAO attacks, such as Sushi has experienced in the past and recently. Upcoming tokenomics changes will reduce single whales' influence, fostering a more egalitarian ecosystem for all stakeholders.

Additionally, instituting network-level staking for Sushi Bar and subsidizing staking costs will enable all participants to engage in governance and earn yield without concerns about gas fees.

Recent controversies about Sushi Labs stem from misconceptions about its purpose, grant funding, and the need to establish a clear direction for Sushi, which we outline in this memo.

DAO Structure

As Sushi progresses, the DAO structure evolves, too. Encompassed with the recent Burū no Shinka proposal implementation, we move the DAO into a more resilient and global model that provides the necessary protections for contributors and stakeholders we've sought for years.

With this restructuring, we sunset the Head Chef role. As stated in the proposal, upon its implementation, I withdrew as Head Chef and assumed the role of Managing Director of Sushi Labs. In my place, the newly formed council structure will assume the Head Chef's responsibilities. As Managing Director of Sushi Labs, I will focus on product strategy and development to support the expansion of the Sushi ecosystem.

Sushi Labs

Sushi Labs will support and develop new product features for Sushi Swap while executing the broader Sushi ecosystem strategy. This strategy includes creating a multi-token product suite, launching franchised or native DEXs, and Susa, the first fully on-chain ETH-based perps DEX powered by Layer N, providing CEX-like trading infrastructure metrics. Additionally, we are exploring the potential launch of a Sushi network or appchain to support a comprehensive array of DeFi products. This strategy can build maximal value for stakeholders.

Benefits of a Multi-Token Ecosystem

• A multi-token ecosystem reduces the risk of Sushi token inflation and mitigates the financial strain of funding DAO initiatives with a multi-product ecosystem.
• By implementing a multi-token approach, we can distribute the costs of various products and drive growth in high-growth verticals, such as perps. While Sushi Labs focuses on product development and core strategy, the DAO Treasury Council will manage the native token balance, AMM proceeds from Sushi.com, and airdrops from the multi-product and token ecosystem.
• Establishing a multi-token ecosystem coupled with a long-term core strategy is essential to positioning Sushi as a hub of DeFi innovation.

Our Grant and Commitment to Product Development

We will use our grant to advance product development, support the multi-token ecosystem, and build franchised DEXs. Here's what the DAO gains from these efforts:

• Airdrops, Utility, and Yield: Benefits for Sushi stakers, presently known as xSushi.
• Dedicated Development: We are focusing on several key projects:
• Franchised DEXs: A strategy to enhance market presence and liquidity.
• Susa: Our fully on-chain CLOB perps DEX on Layer N for superior UX.
• Wara: Building to capitalize on Solana's fast-growing ecosystem.
• Saru: Partnering with ApeChain to expand into high-growth markets.
• Financial Transparency: We will provide quarterly financial disclosures to the DAO, ensuring that the community remains informed of Sushi Labs' fiscal status.

These initiatives aim to drive growth, innovation, and transparency within the Sushi ecosystem.

Closing Statement

We have successfully transitioned the DAO into a governance council structure and secured funding for Sushi Labs, establishing a robust foundation for our future endeavors. Despite its challenges, this pivot has strengthened our community and clarified our strategic direction.

Sushi Labs' efforts to create a multi-token ecosystem are poised to deliver significant value through increased fundamental value, utility, and airdrops. Looking ahead, the potential development of a "Sushi" network will further enhance our ecosystem's capabilities.

Recent partnerships with ApeChain and Layer N, along with our initiatives in the Solana ecosystem, position us for substantial growth. Our commitment to expanding into high-value networks and broadening our product line will drive the continued evolution and success of the Sushi ecosystem. These strategic moves reinforce our role as a leader in DeFi and ensure sustained value for our community and stakeholders.

To Sushi's Future,

Jared Grey

Managing Director — Sushi Labs

P.S. Be sure to follow Sushi Labs on X here: https://x.com/sushi_labs