SushiSwap liquidity migration ahead of schedule, Uniswap liquidity may drop by 80% overnight

SushiSwap, which made a big splash with its vampire mining attack, has passed a new proposal to move up the date for liquidity migration from the original September 11th to as early as this Sunday. If the amount of Uniswap LP tokens staked remains the same, Uniswap will have 80% of its liquidity immediately drained upon activation.

Early Liquidity Migration

According to data from DeFi Pulse, since the deployment of the SushiSwap contract on block height 10750000 on August 28th, the total value of assets locked on Uniswap has increased by nearly $1.5 billion (initially, users could earn SUSHI tokens by staking Uniswap LP tokens on SushiSwap), making Uniswap surpass Aave to become the DeFi platform with the most locked assets on the Ethereum chain.

SushiSwap is an automated market maker protocol forked from Uniswap, with the key difference being SushiSwap's governance token issuance mechanism for liquidity mining. Liquidity providers can earn trading fees and token rewards simultaneously. Leveraging this difference, SushiSwap plans to attract liquidity providers (LPs) through "vampire mining attacks" to draw liquidity away from Uniswap.

According to a proposal released by SushiSwap creator NomiChef, the SushiSwap protocol is ready for liquidity migration. The proposal seeks community consent and a vote to decide whether to advance the date of liquidity migration. The proposal concluded its vote yesterday with 86.7% in favor of advancing the date. Due to a 48-hour timelock activation requirement, liquidity migration is expected to occur at some point on Sunday.

SushiSwap's Migration Plan

According to SushiSwap's mining mechanism, within two weeks after block 10750000, Ethereum users can earn SUSHI tokens by staking specified Uniswap V2 LP tokens on the SushiSwap platform (essentially providing proof of liquidity in Uniswap's liquidity pool). SushiSwap encourages users to deposit a significant amount of funds into Uniswap, then stake the received LP tokens on the SushiSwap platform. At a designated time, SushiSwap will use all users' LP tokens to migrate a large amount of liquidity from Uniswap to SushiSwap, converting users' Uniswap V2 LP tokens into an equivalent amount of SushiSwap LP tokens. This is because users' assets are no longer on Uniswap but on SushiSwap.

According to data from the SushiSwap analytics tool here, Uniswap LP tokens staked on the SushiSwap platform account for approximately 80% of the total Uniswap platform, meaning that if this data remains unchanged at the start of the migration, Uniswap will lose 80% of its liquidity.