Codename BONSAI! - Proposal for Building out SushiSwap on Solana and Serum

Background

With the incredible amount of development and innovation in the blockchain and DeFi space at the moment, seeing SushiSwap emerge as having one of the most vibrant and influential communities is evidence of what a dedicated and engaged group can accomplish. Our belief is really that the sky’s the limit for SushiSwap, however given the pace of development of blockchains and other platforms, it’s difficult to ignore the importance of considering future opportunities for the community. Ethereum has propelled massive adoption and growth for SushiSwap, and we think that using that momentum to leverage the advantages of alternative blockchains will be key to SushiSwap’s next steps.

Idea formation

Our team has been farming, staking and investing in DeFi for the past eight months and we have been farming Sushi since day one. The concept of DeFi embodies everything that crypto is about - giving everyone a chance to access tools that were originally the domain of large banks, companies, venture funds and trading firms while maintaining the autonomy of each individual. Over the summer we witnessed explosive growth across the sector however due to sky-rocketing gas prices, these tools once again began to feel out of reach for the common user.

As time progressed, we found that to convert our ETH to WETH, swap a portion of it to SUSHI on SushiSwap, provide liquidity to the pool and then stake an LP token easily cost over $100. Perhaps for a single, long-term staking position this is acceptable, but when considering the need to move liquidity multiple times within a few days, it became apparent that this would become an ongoing issue.

Then Serum was launched. They built a decentralized exchange with a functioning orderbook on a high speed chain which cost pennies to use. We started exploring their functionalities and came up with an idea. Why not create a real orderbook style AMM on Serum? This would solve 3 large problems at once:

  1. Expensive gas fees and slow transactions which discourage smaller traders and investors from taking part in DeFi liquidity providing and staking

  2. Lack of limit orders and advanced trading UI for traders who want greater control

  3. Fragmented liquidity across the market by aggregating all liquidity on a central order book for everyone to access

After considering how we might be able to solve these key issues by creating an AMM on Serum and Solana, we got to work building and Raydium was born.

More recently we saw the grant for building out support for SushiSwap on Solana and we really got excited. We love what SushiSwap has built; an amazing community closely engaged around an amazing project. If we could somehow work alongside the community to build out support for Sushiswap on Solana, we think the community would quickly see even wider reach while Sushi products would benefit from ecosystem-wide liquidity, fast transactions and low fees on Serum.

Raydium as a bridge for SushiSwap

We have been working on Raydium’s AMM and liquidity pool protocols since the fall of 2020 and have just launched on our platform. Similar to other AMMs, Raydium currently uses the constant curve invariant K = Y/X. This is the same equation that Sushi uses for its market making. Raydium utilizes this equation and prices orders on the orderbook according to the Fibonacci sequence to provide up to 20 orders at a variety of prices with some spreads as small as 20bps between them. In the future, we expect other liquidity providing models to be employed to take advantage of oracles and increased liquidity usage.

Raydium’s protocol is already able to support SushiSwap liquidity pools for the Serum orderbook. Additionally, after working closely with the Solana team on development over the past months and becoming well versed in the intricacies of this highly efficient blockchain, Raydium is capable of acting as a bridge and partner for SushiSwap’s expansion onto Solana. Moreover, bridges like Wormhole and Sollet.io already provide an avenue for ERC-20 tokens to be easily wrapped as Solana SPL tokens and transferred between respective wallets.

Working alongside Raydium would enable the SushiSwap community:

  • To expand its reach to the growing Solana and Serum community

  • To access additional liquidity from Serum. This includes Raydium’s own liquidity, that of other liquidity providers, as well liquidity from individual users and traders on Serum. Thanks to a central order book, SushiSwap would have access to all of the liquidity and order flow across the Serum ecosystem.

  • To quickly leverage Solana to achieve fast transactions, significantly lower fees and potential future features that may be otherwise limited on Ethereum.

  • To reinforce perceptions of SushiSwap as a DeFi leader and innovator.

Proposed collaboration framework

  1. The SushiSwap community determines that the addition of a Serum and Solana based Sushiswap is an opportunity worth pursuing. We are excited for this opportunity to work with the community and welcome any feedback or suggestions on how we can best approach this.

  2. The initial step would be for Raydium to work alongside SushiSwap to build support for liquidity pools and staking on Serum, then deploying on Raydium’s testnet. Cooperation between SushiSwap and Raydium on testing would ensure liquidity pools and staking features are fully operational and that they perform as intended.

  3. The second step would be deployment of Bonsai pools and staking on mainnet.

  • We envision the end product as an additional offering on the SushiSwap page that maintains Sushi’s trademark UI and design but connects to Raydium backends, but we’re certainly open to suggestions.

  • Perhaps with a catchy on-brand name like Bonsai, but we’d love to hear your ideas on this!

Mockup for potential Bonsai Page

  1. The third step would be adding SushiSwap’s Raydium pools on Raydium’s own platform where they would be labeled as SushiSwap pools and would have access to Raydium and Serum’s wider community and liquidity. Again, here we’re open to feedback on what would make the most sense for both communities!

Mockup page for potential SushiSwap Farms on Raydium’s platform

  1. The final step, which isn’t really final at all but an ongoing journey, would be to continue working alongside SushiSwap to provide Raydium support for additional features wherever it seems most valuable for the community.

Points to Consider:

Liquidity Pool Farms

How to allocate rewards between SushiSwap Farms and Bonsai Farms for a single pair is one of the first questions to account for. A couple of options come to mind:

  1. Separate for each pool: Rewards for Ethereum Sushiswap Farms could be completely separate from the Bonsai pools. Liquidity providers would earn rewards proportional to their share of the pools they are in, and only those pools. This would translate to attractive incentives for Bonsai pool liquidity providers initially.

  2. As a % of Total Value Locked (TVL): Rewards could be allocated according to the percentage of TVL represented by liquidity providers for a given pair across both pools. This would mean incentives for Bonsai pools would be relatively small initially.

These are the two straightforward methods, but we’re interested to hear other ideas on what would provide the most value for the community.

Double Yield for SushiSwap’s first Decentralized Franchise Pool

With both SushiSwap and Raydium working together, there would be an opportunity for double yield, similar to what is discussed in the Medium MIRIN proposal for franchised pools. Providing additional rewards to Bonsai pools in the form of our native RAY token would be a great way we could add value to the community directly and get everyone excited about SushiSwap’s expansion to Solana and Serum. We’d like to think Raydium may be one of the first decentralized franchise pools to join the community!

RAY double yield rewards could be available on all farms or also adjusted in a similar manner to how Onsen rewards are selected by 0xMaki and a group of vetted SushiSwap community members. Raydium would work alongside the team to determine appropriate double yield rewards.

This would mean that all Sushiswap stakers on Raydium would not only get SUSHI rewards, but also get additional, free yield from RAY.

Fee incentives for LPs and xSushi Staking

To start with, we could either:

  1. Collect the Sushiswap rewards on Solana, bridge them to Ethereum using sollet.io, and then send them to the Ethereum xSUSHI pool;

  2. Use the rewards to buy SUSHI on Raydium and then send that SUSHI over to xSUSHI on Ethereum;

  3. Use the rewards to buy and burn SUSHI on Raydium

Each of these could be live at launch and would flow rewards back to all SUSHI holders.

EcoSerum grant and cooperation

If the SushiSwap community and Raydium successfully come together to build out support for SushiSwap on Serum, the community would be eligible to receive a generous grant from EcoSerum, a Serum node supporting the development of the ecosystem.

According to the grant, the following “rewards are for the Sushi community, controlled by governance, to do what they want with”:

  • 50k SRM for points 1+2 in the grant

  • 1 locked MegaSerum (MSRM) for points 1-5 in the grant (one MSRM = one million combined SRM)

  • In addition, 20k SRM for pts 1+2 and another 10k for pts 1-5 to the team who builds it

Being the recipient of the MegaSerum would allow the Sushi community to fully participate with Serum, run a node, receive yield, benefit from buy & burns, as well as reduced fees as below that would benefit trades for SushiSwap on Serum:

  • Maker fee from -0.03% to -0.05%

  • Taker fee from 0.22% to 0.1%

Raydium Roadmap

Q4 2020

  • Ideation and project scope

  • Development of the protocol and iteration on testnet

Q1 2021

  • Development of liquidity pools and staking completed

  • Mainnet launched

  • Website and platform launch

After a lot of hard work, Raydium successfully launched on February 21, and is now up and running at www.raydium.io. If you have a minute, take a look around and try out the site. We’re new here though, so go easy and try not to break anything!

Projected

Q1 2021

  • Collaboration with Sushi to power pools and staking for Bonsai

  • Development of cross-chain swap

  • Explore options for further integration between SPL and ERC-20 wallets to streamline user transition

Q2 2021

  • Further collaboration with Sushi on additional features

Q3 2021

  • Leverage of external oracles for improved market making

  • Governance model ideation for further ecosystem development

Raydium’s AMM has been running on Serum’s main net for several weeks already without issue followed by the launch of the platform on February 21st. The Bonsai implementation could be done quickly through a straightforward integration of SushiSwap’s frontend with our JS wrappers. Then we would work together to do some serious testing, and ensure the platform performs as expected in all scenarios.

We anticipate that we could go live with Bonsai, or testnet at least, within Q1 of 2021.

The purpose of this proposal is to lay out an efficient and effective method for SushiSwap to evolve and build out its leading platform on Solana and Serum. Here at Raydium we are excited for the chance to work alongside the community to make this all happen. We hope you’ll consider this proposal and are open to any suggestions or feedback to ensure our communities have the best plan moving forward.

Shall we build Bonsai together?
  • Lets build it!
  • No

0 voters

13 Likes

Hey @handroll I was planning on bringing up your proposal at the sushi forum(The Sushi Forum Official Thread - #3 by magicturtle) later today. I was hoping to get you to come out and talk about it and answer any questions people might have. The call is scheduled for 4PM EST, if you’re unable to make it for whatever reason it’s no worries, your post is very detailed in of itself. Cheers!

1 Like

Sorry, I really can’t make 4PM EST today. I’d be more than happy to talk about it at the next Sushi forum though.

2 Likes

That sounds like a plan!

This is a tremendous proposal, and the market seems to be very appreciative of your project (judging by steep price appreciation of the token soon to rival sushi).

However, wouldn’t Raydium be in (in)direct competition with sushiswap? Not sure I understand what exactly raydium wants to get out of such merger (other than obvious liquidity).

1 Like

My best guess here as an (informed) outsider –

  1. Sushi gets liquidity from Raydium-Sushi and Serum
  2. Sushi gets speed/cost from Solana
  3. Raydium-Sushi gets SUSHI airdrops from Sushi
  4. Sushi gets fees from Raydium-Sushi
  5. Raydium gets exposure from Sushi
7 Likes

grate, just do it .sushi to the moon

4 Likes

I am in a minority here, voting NO.

My reasoning:

1: It seems the proposal helps Raydium much more than it helps Sushi. Sushi is already an established brand with lot of traction and many options.

Sushi doesnt need Raydium as much as Raydium needs Sushi and apart from increasing TAM and some Solana hype that can pump $SUSHI, it doesn’t bring equal value to Sushi in the long term. Especially considering that in the long run Raydium is AMM agnostic and can serve all Sushi competitors as well, there is no exclusivity here.

2: This might be a subjective opinion, but I find Raydium a bit sketchy. I dont think it is a scam per se, but it has follows a standard playbook of low float and big FDV, not enough concrete public information apart from suddenly being pumped.

So if anything goes wrong here, Sushi acting as useful idiot and legitimizing it too early will get a reputation hit by association. I am not saying this WILL happen, but its an asymmetric risk, where Sushi has much more to lose than Raydium.

3: Sushi LPs moving their liquidity to Serum will get rekt much faster. Putting assets into passive XYK LP on top of the CLOB means that passive LP providers are competing with active Serum Market Makers!

What will happen in such environment is that CLOB MMs will get all the orders around fair price, while passive LPs will act as dummies and only bite into the volume when MMs will move away because fair price moved! While there are some ways to mitigate this, I dont think anyone from Raydium or Sushi thought about them. I tweeted about it here.

4: Also a more subjective and maybe too cynical point but: - SBF and Serum founders in general are vocally sceptical about CFMM and XYK LP models. And now they want to attract XYK liquidity into their CLOB ecosystem. With regards to 3rd point, this will create an arbing paradise for smart market makers (like Alameda) on Serum, to the detriment of Sushi LPs. This proposal could be seen as 4d Chess move by which Sam will:

  • Prove a point that XYK sucks (because on order book it will be rekt)
  • Suck out liquidity from Ethereum into Serum
  • Profit via Alameda being the biggest beneficiary of this arb paradise created on Serum
  • Help bootstrap Raydium reputation with no direct cost

Please note that some of my points are more subjective, I am actually long SOL and FTT and hold heavy respect for Sam, but as a SUSHI holder I feel Sushiswap should be more careful and think about long term implications before agreeing to such proposal.

If Sushiswap wants to build on Solana I believe it can do so without Raydium.
If Sushiswap wants to partner with Raydium, I believe it can do so under much more favorable terms (at least consider incentivization of LPs that would take into account unfavorable dynamics wrt competition with CLOB MMs).

42 Likes

Totally respect some of your points! That being said…

  1. Fast CLOBs should decrease slippage for AMMs, not increase it. It means that arbers don’t wait as long to trade, which means the trades are closer to fair
  2. It saves everyone from huge gas fees
  3. No reason to think that the same firms aren’t trading on ETH DEXes as well
  4. Raydium-Sushi can still provide directly to customers via swaps; it just also gets to provide to other Serum traders.
  5. Totally hear you on the newness of Raydium! FWIW I can say: (a) team has been working on it for half a year; (b) team has a significant background in crypto and trading. (And, ©, team isn’t me :stuck_out_tongue: )
9 Likes

100% agree with fiskantes post

Sushi is risking much more than winning with those proposals.

This could make sense if sushi was like an “exclusivity” on raydium on something like this, and even in that case it would be much more worth it for raydium

Strong NO for me

(also market makers fees on raydium are really low, so dropping rewards and barely getting any fees seems like a very bad deal for sushi)

I am ok to try to expand to other network / blockchain, but only if the sushi rewards are very light especially compared to the fees that sushi hodlers and AMM would make

7 Likes

They are a lot of interesting point on this proposition and comments. A partnership could take a bit more than a forum proposal. I believe the Sushiswap team as to delegate or hire a person talented person in the future to negotiate those major deals including the validation process with the community. Raydium team and project are definitely sufficiently interesting to be considered but I also believe the deal has to be reworked to make sure it’ll benefit both in the short and also the long term. My proposal is to name some with sufficient vision to negotiate such partnerships in collaboration with the contribution of the community. The deal may happen or not but it definitely worth considering.

1 Like

voting w/ @Fiskantes here. very well reasoned imo.

8 Likes

In link with my previous email I believe Sushiswap as to consider hiring an ex-banker, VC or analyst with experience in crypto to build a win-win partnership like this one and also to bring Sushi to the traditionnal economy.

1 Like

Hi,
Raydium team here. To add onto SBF’s comment:
I can see where you’re coming from and it does look like Raydium benefits more from this and might be encroaching on Sushi territory but thats not what we’re here for. Our goal is to benefit everyone. There are millions of users out there who love Sushi but can’t afford the gas to stake and vote on this. What we’re here for is to help Sushi reach them. As an example, our largest visitor base by country is Turkey where the GDP per capita is 9000USD. Vietnam ($2715), China ($10000), and India($2099) also rank up there. What we are aiming to do is work together with Sushi to capture these markets that want a chance take part in Sushi but can’t afford to pay 10% of their monthly salary to stake a coin.
Think about the scale of Sushi if it could be the first ETH based platform to capture the world’s two most populous countries.

8 Likes

Transaction saving fee (with SERUM or others) is definitely important but as commented by Fiskantes it can be done by a good team of developers and internally by Sushiswap. The question is why it more interesting to do it with Raydium? Why it creates more value in the short and also the long term…Could you elaborate or adjust your proposition around this point ?

3 Likes

I agree with Fiskantes here, doesn’t seem like it will benefit Sushi long term, especially because we are taking all the risk.

1 Like

1: It seems the proposal helps Raydium much more than it helps Sushi. Sushi is already an established brand with lot of traction and many options.

Response to 1. I actually really disagree with this one strongly. Raydium offers immediate benefits besides just expanding TAM (Total addressable market) SushiSwap would have access to all of the liquidity and order flow across the Serum ecosystem, but would also get fees in addition to access to a wider and growing market. The fees, the gas, I can’t afford to interact on etherum very often, I’m an American but I don’t have enough money for the fees not to represent a huge percentage of my money, even after the gas isn’t in the news and it’s more readonable, I fully believe that eth2 will solve many problems but this will still be more affordable and Raydium X Sushi will appeal to different and new Defi community members. This seems really unnecessary to say but just because Sushi is already established doesn’t mean that it can’t or won’t benefit from diversifying or working with new projects/teams. But Raydium’s team is pretty impressive and it’s market appeal and not future but what they have right now is already something that could long term benefit Sushi and Sushi Holders.

Part one the second part from Fistantes

Not only here is the wording unnecessarily glib but I find it hard to truly not value at all TAM expansion or the fees and the swaps and the savings for Sushi Holders and users and chefs. What do you mean by doesn’t bring equal value? What more value could they bring? Not a rhetorical question I cannot find a counter offer unless you meant to say that Raydium and or Serum offer no extra value to Sushi. They are offering savings and access to liquidity and TAM expansion and of course for sophisticated users just a vast amount of arb opportunities that bring in more net value both to Sushi as a program and the Arber who now uses Sushi even more and that growth and value accrual will continue to be rolled into bigger and fatter and tastier Sushi for Holders and LPs and we’ll everyone in the market (the market that is expanding and growing, that includes 2 ecosystems both gathering more participants using diversified marketing and extra optionality which is what Defi users crave)

Fiskantes 2: This might be a subjective opinion, but I find Raydium a [bit sketchy ]

Response: I find this somewhat inappropriate to be posted in a governance forum as well, because it’s very close to presuming guilt on Raydium and it’s not like Raydium literally popped up out of nowhere. Defi is big and not everyone can catch everything and scams do exists in our space but nothing about Raydium or their roadmap or what they’ve done already engenders suspicion beyond the standard due diligence which can and will be handled if Sushi works with them.
Especially given :sushi: history I find this inappropriate and very UnDefi as a point without some sort of valid proof of malice on the other party’s side. Too conspiracy related imo and not addressing the opposite of why would you spend months building and working on a project with a team just to pull a fast one that will destroy your career and reputation? There are easier ways if all one wants is money.

3: not only do I disagree here but it assumes for some reason that adding liquidity and less fragmented order booking will somehow screw someone over but I don’t think that’s accurate, it simply facilitates trade faster, but the market in aggregate will find a price point and long term that price point will not be specifically dictated by Serum ecosystem market makers or arbers unless most users choose to use Serum and Raydium to the exclusion of most everything else and if that happens partnering with them would be most favorable to Sushi. Note that while everything in this space should grow I don’t see a monopoly happening, that’s just not how market fit and Defi work.

4:
Response. I’m not going to quote it again but I also feel like this is also unfair and unnecessarily accusatory of everyone involved with very little basis and if I’m being honest it’s a bit insulting in Defi that you think Sushi LPs need protection from arbs when Sushi chefs are arbers too.

Quote “If Sushiswap wants to build on Solana I believe it can do so without Raydium.”

Response: Probably but why not both? I still see no reason why doing this isn’t mutually beneficial to every one involved and I personally prefer to optimize my optionality for long term value accrual and community/user retention.

“If Sushiswap wants to partner with Raydium, I believe it can do so under much more favorable terms.”

Response:
You have failed to offer specific more favorable terms and I feel like that’s suboptimal for actually moving forward.

At the time I acquired them I had more sushi than Sol I have no Raydium currently, my total crypto portfolio is small compared to most people I assume care enough to post in governance forums. I apologize in advance if any of what I said comes off as too argumentative but in general I found this post to mostly be vague points and appearing to be more against the proposal without substantive or concrete counterpoints and with zero serious addressing the benefits of such a collaboration. Working together and making better products with optionality for everyone is a core Defi ethos imo.

4 Likes

What risks specifically and what are the rewards/incentives and unwanted consequences that would make reframing from collaboration preferred to the potential benefits and if I’m not being too specific I want ones that apply specifically for this proposal not the systemic risks of bugs or hacks or anything that is generalized.

If CZ wrote this proposal twitter would attack him for undermining our principles. Do not accept a proposal because of the person making it.

I have gone through the effort of recreating some of the proposal but replacing every mention of Raydium with Pancakeswap and Solana with BSC. Proposal reposted but CZ is the creator of it.

3 Likes

Hi, I agree with your point of not accepting a proposal because of the person making it. But I don’t see how this proposal undermines anyone’s principles. Could you tell me specifically which parts violate what principles and in what way because while I appreciate the thought experiment of replacing the proposal with another name/project attached I still fail to see something wrong with it unless the details that are not yet discussed would lead to something bad that has not been discussed here.

1 Like