SushiSwap wants to offer a wider net of margin assets than independent DeFi lending platforms.
Decentralized exchange SushiSwap has announced the "rolling release" of Kashi, a specialized lending platform specifically designed for margin trading on the exchange, and BentoBox, a dual-purpose yield vault.
Kashi aims to let traders borrow assets for creating leveraged long and short positions, similarly to other lending platforms like Compound or Aave, and BentoBox will enable users to earn interest from farming liquidity pools while simultaneously using the same tokens to contribute to lending pools.
According to SushiSwap CTO Joseph Delong, SushiSwap’s Kashi aims to be more specialized than other lending protocols, allowing a wider selection of assets available for borrowing. It does so by isolating risk between individual lending pairs, meaning that a collapse in value of one particular asset will not affect all the positions on the platform. While on other lending platforms, users depositing an asset can use it as collateral to borrow any asset listed, Kashi uses specific lending pairs. A user depositing Ether (ETH) into a vault with Wrapped Bitcoin (WBTC) will only be able to borrow WBTC, not other assets.
“Kashi is an isolated lending pair market. The reason most lending protocols are naturally conservative with the addition of collateral and borrow tokens is that the risk is pooled across the entire pool,” said Delong. “[...] With isolated lending pairs the collateral and borrow tokens are pool specific. So in the event of a failed liquidation only that individual pool risks insolvency.”
Delong anticipates that this will be an “AMM moment for lending” where users can “individually define markets that they find necessary” and therefore significantly increase capital efficiency across the lending market.
The isolated risk profile means that Kashi can add many more assets with much higher risk than other platforms, enabling shorting on a wide selection of crypto assets. The ability to short can increase market efficiency to a significant extent, letting traders fully express their opinion on the price of the asset, as well as facilitate derivatives such as futures and options. Kashi also features flash loans, instant and unlimited loans that do not exist unless they are repaid in the same block. Kashi V1 includes a pre-built list of lending pools, though the V2 release in a few weeks should allow anyone to create their own pairs.
For non-traders, the Kashi lending platform allows obtaining yield on their assets through BentoBox, which acts as the wallet for Kashi. The platform allows users to combine yield sources, obtaining both the fees from SushiSwap traders, the Onsen liquidity mining rewards, and the interest rates paid by Kashi users.
BentoBox and Kashi have been in development for a significant amount of time, first being announced in September 2020, shortly after the creation of SushiSwap. According to its GitHub page, Kashi was initially audited by PeckShield and partially by Quantstamp, though the “thoroughness wasn’t overwhelming.” The SushiSwap team then focused on creating an internal checklist and reaching 100% test coverage. Certora has also conducted a formal verification of the contracts, which allows to mathematically prove that the program behaves as expected.
SushiSwap core team member 0xMaki expressed excitement for the rolling launch, saying that users can expect new features soon.
"The community has been awaiting this moment since October we are today just releasing the first version of a product that will evolve on a rolling basis you can expect a lot coming next from Sushi," he said. "I strongly believe we were able to assemble one of the most passionate teams in DeFi. Our product pipeline is so filled we had to put Certora on a 3mo retainer for all our SC needs."
Kashi is one of the first major implementations of SushiSwap’s 2021 roadmap, which aims to diversify the exchange beyond a pure automated market maker platform. This marks a further point of divergence from the project it forked from, Uniswap, whose V3 release focused on changing the liquidity provision mechanics of its AMM.
*Andrew Thurman contributed reporting to this story