SushiSwap head warns of threat to exchange's viability

SushiSwap head warns of threat to exchange's viability
The project's temporary reserve replenishment model should help with funding

The reserve vault of decentralized crypto exchange SushiSwap is facing a $5 million deficit, threatening its viability and requiring "immediate intervention." This was announced by Jared Gray, head of the trading platform, on the project's online forum, Bloomberg writes.

The price of SUSHI reacted to the publication with a drop of more than 13%. On Dec. 7, the exchange's native token is trading at $1.18.

The exchange's coffers hold funds to pay developers and fund project maintenance and infrastructure costs. According to Gray, under current conditions, the funds in the coffers will be sufficient for about a year and a half of the project's operation. Gray published a proposal including measures that should help "preserve the future of Sushi.

According to the head of the exchange, the developers have cut operating costs from $9 million to $5 million, but it was not enough to maintain the viability of the exchange. As a stopgap measure, Gray suggested that all of the revenue from commissions, 90% of which is now distributed to SUSHI token holders in stacking, be sent to the treasury. Gray calls this an "asset diversification," providing an opportunity to limit forced market sales of SUSHI tokens to further fund the project.

At the time of publication, 66% of voting token holders supported the proposal. The updated economics of the project are also approved by the community, with changes to the protocol due to take effect in Q2 or Q3 2023.

Trading volume on decentralized exchanges running on the Ethereum blockchain fell 45% in November from the peak of last year, according to Messari analysts. SushiSwap's market share dropped to 2%, and trading volumes in ETH are down 95% from May 2021.