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Sushi on Katana: Swaps and Liquidity

Sushi (SushiSwap) is Katana’s core decentralized exchange (DEX). It is where tokens are swapped on Katana and where liquidity providers supply the liquidity that makes those swaps possible.

You can swap tokens directly in the Katana app.

How Sushi Works on Katana

Sushi uses liquidity pools. Instead of matching buyers with sellers, each pool holds a pair of tokens supplied by liquidity providers, and swaps are made against that pool. Liquidity providers earn a share of the trading fees in return.

Sushi on Katana offers two types of pools:

  • Concentrated liquidity pools (V3): you choose the price range your liquidity covers. This puts your liquidity to work where trading actually happens, but it only earns while the market price is inside your range.
  • Full-range pools (V2): your liquidity covers every possible price. It is simpler to manage, since it never goes out of range, but it is less capital efficient.

How Sushi Connects to Katana

Sushi is one of Katana’s core apps, so it is built into how the network works rather than being just another app deployed on it.

  • Chain-Owned Liquidity: Katana uses part of its network revenue to build liquidity that the network owns and keeps deployed in its core markets, including spot trading. This gives Sushi a base of liquidity that doesn’t depend only on outside liquidity providers. See Chain-Owned Liquidity.
  • KAT incentives: 400 million KAT from Katana’s liquidity mining allocation is set aside for Sushi to distribute to its users. See Tokenomics & Schedules.
  • Gauge voting: vKAT holders vote on which liquidity pools receive KAT incentives each epoch, so the community decides where rewards go. See How KAT Staking & Voting Work.
  • Security: Sushi is a member of the Katana DeFi Security Council, which can veto admin proposals and respond to emergencies. See Governance.

Earning as a Liquidity Provider

Liquidity providers on Sushi can earn in two ways:

  1. Trading fees from swaps made against your pool.
  2. KAT incentives, if you stake your liquidity position in the Katana app and your pool receives incentives through gauge voting.

For concentrated liquidity positions, only liquidity that is in range earns trading fees and KAT incentives. If the price moves outside your range, your position stops earning until the price comes back or you rebalance it.

Providing liquidity has risks

Liquidity providers can lose value when token prices move (often called impermanent loss), and positions can earn less than expected if they go out of range. See Risk for more on the risks of using DeFi on Katana.

For Developers