SushiSwap turns on SUSHI rewards in a new fight for Uniswap liquidity

SushiSwap’s SUSHI reward program began at Ethereum block 10,750,000 on August 28, 2020, putting a new competitive mechanism into operation across decentralized finance. Instead of first building independent trading pools, the pseudonymous project invited Uniswap liquidity providers to deposit their existing Uniswap V2 liquidity-provider tokens into SushiSwap’s MasterChef contract and earn newly issued SUSHI.

Ethereum block 10,750,000 was finalized at 15:31:15 UTC. The block timestamp provides a precise start for the reward schedule, although it does not by itself measure deposits, users, token prices or the dollar value participating at that moment.

A fork paired with an incentive

SushiSwap had been publicly introduced on August 26 as an “evolution” of Uniswap. Its contracts copied and modified open-source components from Uniswap and other Ethereum projects, but the important addition was economic: SUSHI would reward people who staked Uniswap pool tokens in designated MasterChef pools.

The project’s disclosed schedule specified a base issuance of 100 SUSHI per block. A ten-times multiplier applied during the first 100,000 blocks, making the initial advertised rate 1,000 SUSHI per block across the eligible pools. Allocation points determined how rewards were divided, and the SUSHI-and-ether pool received double weight. The design also directed developer rewards equal to one-tenth of the rewards calculated for participating stakers.

Those figures describe token issuance rules, not investment returns. Any annualized yield depended on changing SUSHI prices, Ethereum block times, the value deposited in each pool and each participant’s share. No reliable, venue-neutral August 28 closing price or event-day total-value-locked series was established for this reconstruction, so no price, return or dollar-deposit claim is made.

The planned liquidity migration

The reward system was designed as a staging phase. After approximately 100,000 blocks, SushiSwap proposed using a migrator contract to redeem the accumulated Uniswap pool tokens for their underlying assets and place those assets into corresponding SushiSwap pools. Participants would then hold exposure to liquidity operating through the new exchange.

The project further proposed retaining the same total 0.30% trading charge associated with the Uniswap model while changing its distribution: 0.25% would go to active liquidity providers, and 0.05% would be converted into SUSHI for distribution to SUSHI holders. On August 28, that was a stated design for the exchange after migration, not evidence that an independently operating SushiSwap market had already generated those fees.

This distinction explains why the launch mattered. Open-source code made the exchange mechanics reproducible, while the token gave liquidity providers a financial reason to move. The strategy tested whether network liquidity—the essential input for efficient automated trading—could be made portable through incentives rather than accumulated only through a protocol’s operating history. The approach soon became known as “vampire mining,” but that later label should not be mistaken for proof on August 28 that the planned migration would succeed.

Control and security remained unsettled

The contracts did not eliminate reliance on project administrators. The preserved MasterChef source describes the contract as ownable, says its owner wielded substantial power and allows the owner to add pools and designate a migrator. The project said ownership would eventually move to governance after SUSHI was sufficiently distributed, making decentralization an intended transition rather than a completed launch-day condition.

The project also characterized MasterChef as unaudited and the system as beta. Its invitation for outside reviews was a warning, not assurance that the code was safe. Depositors therefore faced smart-contract, administrator, token-price and liquidity risks that the published reward rate did not capture.

Later context

Contemporaneous reporting on August 31 cited the independent Zippo tracker for more than $700 million deposited after the announcement. That was a later, point-in-time estimate with no surviving audited methodology in the report, not an August 28 measurement. The defensible event-day conclusion is narrower: block 10,750,000 activated a token incentive that turned a software fork into a live contest for Uniswap liquidity.