structural analysis of sushiswap

*This article is a continuation of our “A Deep Dive into Sushi” series. Do have a read of our Part 1, where we performed a DCF analysis of SUSHI by projecting its trading fee growth! In this article, we constructed a balance sheet standard of Sushi using the perspective of a nation-state.

Part 1. Fundamental Analysis 

Part 2a. Structural Analysis

Part 2b. Structural Analysis (Mint-Lock Index)

The core tenets of many Layer 1 blockchains are their open and decentralized features, giving participants equal opportunity to obtain data, on-demand. Making sense of this data is tough though, as transactions can be as granular as Lego blocks – constructive in small batches but overwhelming if disorganized.

When sifting through large data, it’s often easy to miss the forest for the trees, and an established standard almost always helps to tell a better story. For the most part, DeFi protocols of today are only characterized by simple metrics such as Total Value Locked (TVL), fees earned, and volumes traded; beyond that, there has yet to be any meaningful standard for users to study protocol health at a glance.

Setting a Basis

In traditional finance, corporations use accounting standards to characterize performance, and this is often the basis for most comparative and fundamental analyses. Having a protocol-specific financial statement in DeFi should help in our growing pursuit to better understand the space, while still allowing us to retain the level of detail that a blockchain offers.

At the moment, there is little literature and discourse on creating such a standard. The reason was obvious to us only once we attempted to brute-force traditional accounting principles. Aside from the few hairs we lost, this was particularly difficult as DeFi protocols mint their own native ‘currency’ (token), which runs contrary to how typical corporations operate. 

It soon dawned upon us that the ability of DeFi protocols to produce their currency mimics that of nation-states. Central banks around the world also maintain their accounting standards to track changes in national reserves over time. Despite differences in economic systems across countries, they are nevertheless governed by a fundamental concept known as the Policy Trilemma, which we adopted in scoping out our DeFi accounting standard.

The Policy Trilemma

Countries are faced with the policy trilemma as a result of the country’s exchange rate, monetary policy and foreign capital flow being closely intertwined. The trilemma states that only a maximum of two out of the three may be controlled, and attempts to control all three will be futile. For example, Singapore chooses to control its exchange rates while keeping its borders open to capital flows. If the Singapore government tries to loosen its monetary policy by decreasing interest rates, it will lead to an outflow of foreign capital in search of higher returns elsewhere. There will be a corresponding decrease in demand for the Singapore Dollar, weakening the Singapore Dollar and causing the Singapore government’s exchange rate control to be ineffective. 

While abiding by the policy trilemma, countries across the world align their policies in different manners that best suit their economic circumstances:

Policy trilemma for the US, China and Singapore

Through this policy trilemma framework, we observe that the US economic system which maintains a free flow of capital, a floating exchange rate, and an independent monetary policy – to be most relatable to how a DeFi decentralized exchange (DEX) protocol like Sushi operates.

Operational comparison between US economic system and SUSHI

In the US monetary system, the accounting standard is controlled by the Federal Reserve. A close look at the FED’s balance sheet provides us with the foundation for creating a similar balance sheet for Sushi.

The FED’s Balance Sheet

The Federal Reserve balance sheet

To enact monetary policy, the FED primarily controls the level of reserves within depository institutions by purchasing or selling US treasuries. For every dollar held by depository institutions or in public circulation, it is backed by a similar asset value for the FED which predominantly comprises US government bonds (Treasury securities). As a result, reserve balances and notes make up the FED’s liabilities, backed by Treasury securities and foreign reserve assets on the FED’s balance sheet.

Through various Treasury purchase programs, the FED can influence the direction of key rates that power the US economy.

Constructing Sushi’s Balance Sheet

With an understanding of the US FED’s balance sheet, let’s take a look at how one of the most popular DeFi DEX ecosystems, Sushi, could construct its balance sheet. A bird’s eye view of Sushi’s ecosystem will guide us towards its corresponding balance sheet items. Should any component be unfamiliar to you, do have a quick read of our previous article, where we broke down the overall Sushi ecosystem in closer detail.

Primary token flows across Sushi ecosystem

With the above, we can now map key token features to similar items on the US FED’s balance sheet:

**From this point on, we’ll refer to the main Sushi ecosystem as 'Sushi' and Sushi's native protocol tokens as 'SUSHI'.
Sushi's token component compared to the Federal Reserve

Proposed Balance Sheet

In constructing the following balance sheet structure for Sushi, we have denominated each item in US dollars to avoid cluttering each balance sheet item with the different types of tokens available (especially for LP tokens). Should one wish to better track changes among individual token types in Sushi’s ecosystem, it will be helpful to further break down each item into its equivalent constituent tokens.

Sushi's balance sheet

Possible Interpretations

With a balance sheet for Sushi in place, we can view Sushi’s ecosystem as a single cohesive unit rather than as fragmented pieces. Through this process, it opens up new ways of tracking the development of Sushi’s ecosystem.  

Just like how the Federal Reserve’s balance sheet is scrutinized to gain clues on US monetary policy, we may infer how tokens flow within Sushi’s ecosystem by analyzing changes in Sushi’s balance sheet over time. This may be of interest to Sushi’s users since LP farming and SushiBar staking yields are influenced by the flow of LP tokens/Sushi within those pools. For example, tracking changes in the size of TVL and SushiBar tokens may produce insights on how yields move over time. This might even be extended to create a ‘monetary policy framework’ for Sushi as well, where different yields across Sushi’s ecosystem combine to regulate token distribution, similar to how the US FED adjusts rates like IOER and repo rates to guide US monetary policy.

Another possibility comes from deriving balance sheet ratios for in-depth comparative analysis beyond commonly used FDV/TVL-based metrics. For instance, (distributed SUSHI)/(SUSHI in SushiBar + Masterchef rewards SUSHI) may be used to compare the selling vs holding degree of native protocol tokens. While these possibilities lie beyond the scope of this article, it will certainly be interesting to dive deeper into these areas moving forward.


Through this exercise, we hope to have given you some food for thought in understanding how Sushi’s balance sheet may be depicted through the lens of the US Federal Reserve System. Do reach out and let us know if you would construct Sushi’s balance sheet differently!

Our intentions are pure: to bring something familiar from the realm of traditional finance into DeFi. As with all new recommendations, there will be gaps, but we believe in testing uncharted waters, the very ethos of DeFi itself! And as with all things DeFi, please DYOR. Our approach is unaudited and feedback is welcomed as always!


Treehouse holds SUSHI. This publication is provided for informational and entertainment purposes only. Nothing contained in this publication constitutes financial advice, trading advice, or any other advice, nor does it constitute an offer to buy or sell securities or any other assets or participate in any particular trading strategy. This publication does not take into account your personal investment objectives, financial situation, or needs. Treehouse does not warrant that the information provided in this publication is up to date or accurate.