Reference entry · Decentralized exchange protocols
What Sushi Swap is and how the protocol works
Sushi Swap is a decentralized exchange protocol, which means a set of public smart contracts that let anyone trade one token for another, or deposit two tokens into a pool and earn a share of the fees other people pay to trade against it. There is no account to open, no deposit to make, and no company holding the funds while a trade settles.
The protocol launched in August 2020 as a fork of Uniswap V2 and became notorious almost immediately for a liquidity campaign that pulled deposits away from the code it had copied. Since then Sushi Swap has spread across dozens of blockchains, added concentrated liquidity pools and a routing engine that shops for prices across other venues, and passed through several rounds of governance drama and reorganization.
This entry covers what Sushi Swap does, how its pricing and fees work, what the SUSHI token is for, how the protocol has been governed, and which risks matter most in practice. It is descriptive rather than promotional, and nothing here is financial advice.
01What it actually is
At its core, Sushi Swap is an automated market maker, usually shortened to AMM. Instead of matching buyers against sellers in an order book, a Sushi Swap pool holds a reserve of two tokens and quotes a price derived from the ratio between them. Anyone can trade against that reserve at any hour, and the price moves as the reserves change. Almost everything Sushi Swap does at the base layer follows from that one arrangement.
It helps to separate the protocol from the website. The contracts live on public blockchains and can be called by any wallet, script, or competing interface; the Sushi Swap front end is simply one convenient way to build those calls. If the site were unreachable tomorrow, the pools would keep working for anyone able to talk to the contracts directly, which is what people mean when they describe Sushi Swap as non-custodial.
Listing is permissionless. Nobody at Sushi Swap approves a token before it can be traded; anyone can create a pool for any pair of contract addresses and seed it with liquidity. That openness is why a new token can be tradable minutes after it is deployed, and it is also why a trader has to check that the address in front of them belongs to the asset they think they are buying.
What Sushi Swap is not: a broker, a custodian, or a place with a support desk that can reverse a transaction. There are no fiat deposits, no matching engine, and no margin desk. Sushi Swap sits much closer to a piece of public plumbing than to a firm acting on your behalf, even though real people and, at various times, real legal entities have built and maintained it. A general primer on decentralized finance is useful background for readers new to the category.
02Origins and the vampire attack
Sushi Swap appeared in late August 2020, published by a pseudonymous developer known as Chef Nomi. The code was a near copy of Uniswap V2 with one substantial addition: a token, SUSHI, minted as a reward for liquidity providers, together with a promise that holders would receive a share of trading fees. That single change turned a clone of Sushi Swap's predecessor into a genuine competitor.
The launch strategy became a case study and earned a nickname: the vampire attack. For roughly two weeks, Sushi Swap paid SUSHI emissions to people who staked their Uniswap liquidity provider tokens. When the migration finally ran, those staked receipts were redeemed and the underlying assets were moved into Sushi Swap pools in one sweep, transplanting a large share of a rival's liquidity overnight. It remains the manoeuvre Sushi Swap is best known for.
Copying open-source code was legal and unremarkable. Paying people to bring the other exchange's deposits along with them was the part nobody had tried at that scale.
The project then nearly ended. In early September 2020, Chef Nomi converted the development fund, worth roughly fourteen million dollars at the time, into ether, and the market read it as an exit. After several days of public pressure the funds were returned and an apology was posted, but the episode attached a reputation to Sushi Swap that took years to work off.
Control of the admin keys passed briefly to Sam Bankman-Fried of FTX and Alameda Research, then to a multi-signature wallet held by community members chosen through a token vote. The handoff was fast, improvised, and, for a protocol holding a great deal of other people's money, remarkably public. Sushi Swap has been run by some version of that community arrangement ever since.
Leadership has changed hands several times since. A pseudonymous contributor known as 0xMaki led development through the expansion years, a token-holder vote installed Jared Grey as head chef in the second half of 2022, and in 2024 day-to-day operations moved into a separate entity, Sushi Labs. Every transition reopened the argument about who speaks for Sushi Swap, and every argument was settled, at least formally, by a vote of SUSHI holders.
03How a swap works
A trade on Sushi Swap is a single transaction that pushes one token into a pool and pulls the other one out. The pool does not read a price from an external feed. It calculates the price from its own reserves, which is why a Sushi Swap quote can differ from the figure a market data site displays, particularly in a thin pool.
Classic Sushi Swap pools use the constant product formula, written as x times y equals k. Multiply the two reserves together and the result must not fall after a trade; the fee is what makes it grow. If a pool holds one hundred of token A and two hundred of token B, buying token A drives its balance down and token B's up, and each additional unit costs more than the last. The curve never runs out of tokens, it simply makes the final ones absurdly expensive.
That mechanic produces price impact, which is not the same thing as a fee. Price impact is the movement your own order causes along the curve, and it grows with the size of the trade relative to the pool. A ten thousand dollar order against reserves worth millions barely registers; the same order against fifty thousand dollars of reserves moves the price hard and hands most of the difference to the arbitrageurs who push it back. Sushi Swap estimates this figure before you confirm, and it is the number worth reading.
Slippage tolerance is a separate setting that decides how far the quote may drift between the moment you sign and the moment the transaction is included in a block. Set it too tight and the trade reverts, costing gas for nothing; set it too loose and you have authorized a worse fill than you intended. The default in the Sushi Swap interface is a sensible starting point for liquid pairs, while low-liquidity tokens and tokens that charge a transfer fee usually need it raised deliberately rather than blindly.
Key takeaway
Because pending transactions are public, a large order with generous slippage can be sandwiched: a bot buys ahead of you, lets your order move the price, then sells into it. Splitting big orders, keeping tolerance tight, and preferring deep pools all reduce the exposure. This is a property of public blockchains rather than something peculiar to Sushi Swap, but it applies to every trade routed through it.
04Providing liquidity
The other side of Sushi Swap is liquidity provision. Depositing a pair of tokens in the pool's current ratio mints an LP token, a receipt representing a proportional claim on the pool including whatever fees accumulate while the deposit sits there. Burning the receipt returns the share. Nobody at Sushi Swap holds the deposit; the contract does, and the contract has no discretion.
In classic Sushi Swap pools, fees are not claimed separately. They stay in the reserves, so the redeemable value behind each LP token creeps upward as trading continues. The faster the pair trades relative to the size of the pool, the faster that value climbs, which is why volume matters more to a provider than the headline size of a market.
The cost of that yield is impermanent loss, an unfortunate name for a very real effect. When the price ratio between two pooled tokens changes, the pool mechanically sells the appreciating asset and buys the depreciating one. The depositor ends up holding less of the winner than they would have by simply keeping both tokens in a wallet. The loss becomes permanent the moment they withdraw at the new ratio, and it is only worth bearing if the fees earned exceed the gap. Sushi Swap does not shield anyone from this, and no automated market maker can.
The practical consequence is that closely correlated pairs, two dollar stablecoins or a token and its staked derivative, carry far less divergence risk than a volatile token paired with ether. Providers on Sushi Swap tend to sort themselves accordingly, with tight pairs attracting size and volatile pairs attracting incentives to compensate for the risk.
Incentives are the third component. Onsen, the long-running Sushi Swap rewards program, directed SUSHI emissions to selected pools so that smaller projects could rent liquidity they could not otherwise attract, and partner projects have funded similar programs in their own tokens. Reward income is genuine, but it arrives in an asset whose price also moves, and it tends to shrink as more capital crowds in to farm it.
05Concentrated liquidity
Constant product pools spread capital across every conceivable price from zero to infinity, which is elegant and wasteful. Concentrated liquidity, added to Sushi Swap during 2023 in the style pioneered by Uniswap V3, lets a provider pick a price range and place capital only inside it. Within that band the position behaves like a far larger classic position, so the same money supports more trading depth.
The trade-off is attention. When the market price leaves the chosen range, the position stops earning fees entirely and settles into whichever of the two assets is now the less desirable one. Wide ranges behave much like the old pools; narrow ranges earn considerably more while they are in range and demand rebalancing when they are not. Sushi Swap will show you whether a position is currently in range, but it will not move it for you.
Concentrated positions are individual rather than fungible, since two providers with different ranges do not hold interchangeable claims. On Sushi Swap they are issued as NFTs, and accrued fees sit as claimable balances instead of compounding automatically back into the position, so leaving one untouched for months is not the same as leaving a classic deposit alone.
Fee tiers arrive with the same model. Rather than one rate for every pair, concentrated pools on Sushi Swap can be created at several tiers, with the lowest suited to stablecoin pairs and the highest to thin, volatile ones. Both designs coexist: Sushi Swap kept the classic pools running as concentrated pools were rolled out, so the same pair may exist in more than one form, at more than one fee, on the same chain.
06Routing and cross-chain swaps
Very few swaps travel through a single pool anymore. The Sushi Swap route processor splits an order across paths, hops through intermediate tokens, and can draw on other exchanges deployed to the same chain when they offer a better leg. From the trader's side it is one confirmation; underneath it may be several pools across several venues, executed atomically.
That makes Sushi Swap an aggregator as well as an exchange. The distinction matters when reading a quote, because the price shown reflects the whole route: a pair with a shallow native pool can still fill well when a deep path exists through a common asset such as ether or a major stablecoin.
Cross-chain swaps are handled by a separate component that pairs a swap on the source chain with a bridge transfer and a second swap at the destination. Sushi Swap has relied on third-party messaging and bridging providers for this rather than operating its own bridge. The convenience is real and so is the extra risk surface, since a cross-chain swap inherits the security assumptions of whichever bridge carries the value in the middle. A cross-chain trade on Sushi Swap also takes longer to settle than a single-chain one, because the bridge sits between the two halves.
For most users the routing layer is invisible, which is the point of it. It is still worth knowing that it exists, because it explains why a Sushi Swap quote can beat any single pool it draws on, and why a route occasionally fails for reasons that have nothing to do with the pair being traded.
07The SUSHI token and who earns what
SUSHI is the protocol's own token. It began life as an emissions reward for liquidity providers and became the instrument of governance, so holding it confers voting weight over proposals rather than any legal claim on Sushi Swap or its treasury. Governance later capped the supply at 250 million tokens, closing off the open-ended inflation the launch had started with.
Staking wraps SUSHI into xSUSHI. Historically a slice of every trading fee collected across Sushi Swap was used to buy SUSHI on the open market and add it to the staking pool, so each xSUSHI came to represent a slowly increasing quantity of the underlying token. Nothing is claimed by hand; the exchange rate moves, and stakers realize the difference when they unwrap.
The split most often quoted is 0.30 percent per trade in classic pools, of which 0.25 percent stays with liquidity providers and 0.05 percent goes to stakers. Governance has revisited that arrangement more than once, redirecting the protocol's share toward the treasury during lean periods, so anyone relying on a precise number should check the current proposals rather than the figure they remember. Sushi Swap has always treated the fee split as a policy lever rather than a constant.
Emissions were the other half of the token's story. Early on, a fixed number of SUSHI was minted every block and distributed to staked LP tokens, with a portion routed to the treasury; the rate was cut repeatedly and the schedule was designed to end rather than run forever. Once it did, the argument for holding SUSHI rested on governance and fee participation instead of farm yield, and Sushi Swap had to win liquidity on the strength of its volume rather than its printer.
It is worth saying plainly that SUSHI is a volatile asset. Its price carries the market's opinion of Sushi Swap, of competing exchanges, and of the whole decentralized finance sector, and it has spent long stretches far below earlier highs. Fee income depends on trading volume, which is deeply cyclical, and voting power is worth very little to someone who never intends to use it.
08How the protocol is governed
Sushi Swap is governed by holders of SUSHI, principally through a public forum where proposals are drafted and a signalling vote weighted by token balance. Execution has generally required a multi-signature wallet operated by elected signers, which makes governance a mixture of open debate, token voting, and a small number of humans who hold the keys.
The record is mixed and genuinely interesting. Sushi Swap votes have set the supply cap, changed the fee split, funded contributors, restructured teams, and approved a legal defense fund after the project disclosed in 2023 that it had received a subpoena from United States securities regulators. Contentious proposals have also stalled, been rewritten, or passed on turnout thin enough to raise fair questions about what a quorum should mean.
In 2024 the day-to-day work moved into Sushi Labs, an operating entity created to ship Sushi Swap software faster than a forum can deliberate, with the DAO retaining its mandate over the treasury and the token. Critics saw creeping centralization; supporters saw an honest description of who had been doing the work all along.
Why this matters to a depositor
The rules of Sushi Swap can change. Fee splits, incentive programs, and even which products remain supported have all been altered by vote. That is a feature if you follow governance and a hazard if you deposit and forget, so anyone with meaningful capital in Sushi Swap should at least skim the proposals that touch their position.
09One protocol, many chains
Sushi Swap was among the first major exchanges to treat multichain deployment as a strategy rather than an experiment. Its contracts have been deployed to dozens of networks, covering Ethereum, its major rollups, and a long tail of alternative layer ones and application chains.
Each Sushi Swap deployment is its own market, with its own pools, its own depth, and its own token addresses. A pair that fills cheaply on one network can be nearly untradeable on another, and the same ticker on two chains is two entirely different contracts. Liquidity does not wander between them by itself. Checking which chain a Sushi Swap pool lives on before bridging assets toward it is not an optional step.
Breadth is a real advantage where a chain is young and the incumbents have not arrived yet, and a maintenance burden everywhere else, because every deployment needs monitoring, incentives, and upgrades. Sushi Swap has narrowed its focus repeatedly for exactly that reason, retiring products and deprioritizing networks that never carried enough volume to justify the attention.
10Products beyond swapping
Around the exchange itself, Sushi Swap has built and retired a fair number of side products. BentoBox was a token vault designed so that idle deposits could earn yield while remaining usable as collateral by applications built on top of it. Kashi, built on that vault, offered isolated lending markets so that one risky collateral asset could not contaminate unrelated pairs.
Launch and payment tools
MISO was a launchpad for token sales, offering batch auctions, dutch auctions, and simple crowdsales. Furo handled streaming and vesting, paying contributors or investors by the second instead of in lump sums.
Marketplaces and frameworks
Shoyu, an NFT marketplace, was launched, closed, and later rebuilt. Trident was an attempt at a modular pool framework supporting several curve types under one roof.
Not all of these survived. Several have been wound down or left unmaintained as attention returned to trading, which is the part of Sushi Swap that actually produces revenue. Reading the protocol's history as a straight line of accumulation would be a mistake, because it has subtracted at least as often as it has added. The Sushi Swap of today is a narrower thing than the one of 2021, deliberately so.
The lesson for a user is simple: check whether a given component is still supported before committing funds to it. The exchange contracts are the part of Sushi Swap with the longest continuous operating record, and the peripheral products deserve to be judged on their own current status rather than on an article written when they launched.
11Fees and figures
Fees are the clearest way to understand who earns what. In a classic Sushi Swap pool, a trade pays a single percentage taken from the input amount; most of it stays in the pool for liquidity providers, and the remainder has been directed to stakers or to the treasury depending on the policy in force at the time.
Distribution of a 0.30 percent classic pool fee
Grey segment · protocol share, 0.05 percent, historically routed to xSUSHI stakers
Concentrated pool fee tiers
Concentrated Sushi Swap pools use tiers instead of one universal rate, chosen when the pool is created, so a stablecoin pair and a thin volatile pair are not forced to charge the same. The tier forms part of the pool's identity, which is why several pools can exist for a single pair.
| Tier | Typically used for | Provider trade-off |
|---|---|---|
| 0.01% | Pairs that should barely move against each other | Volume must be very high to matter |
| 0.05% | Stablecoin and pegged asset pairs | Thin margin, low divergence risk |
| 0.30% | Standard volatile pairs | The familiar balance inherited from classic pools |
| 1.00% | Thin, highly volatile or exotic pairs | Higher compensation, fewer trades |
None of these percentages include network gas, which is paid to the blockchain and not to Sushi Swap. On a congested layer one, gas can dwarf the trading fee on a small order; on a rollup it is usually a rounding error. Choosing where to trade is therefore as much a cost decision as a liquidity one.
12Comparison with the alternatives
Comparing Sushi Swap with the alternatives usually means comparing three different things at once: the classic pools, the concentrated pools, and the centralized order-book venues most traders came from. All three solve the same problem under very different assumptions.
The table below is about mechanics rather than marketing. Which column suits a given person depends on whether they value custody and open access above convenience and support, and on whether they intend to provide liquidity on Sushi Swap at all.
| Criterion | Sushi Swap classic pools | Sushi Swap concentrated pools | Centralized order-book exchange |
|---|---|---|---|
| Custody of assets | Your wallet, always | Your wallet, position held as an NFT | The venue holds the balance |
| Pricing mechanism | Constant product curve | Curve within a chosen range | Bids and asks matched by an engine |
| Capital efficiency for providers | Low, capital spread over all prices | High while the price stays in range | Market makers manage their own inventory |
| Ongoing management | Deposit and leave it | Monitor and rebalance ranges | Not applicable to ordinary users |
| Listing a new asset | Permissionless | Permissionless, plus a fee tier choice | Approved by the operator |
| Identity checks | None at the contract level | None at the contract level | Usually required |
| Recourse after a mistake | None, transactions are final | None, transactions are final | Support desk, subject to policy |
13Risks worth taking seriously
Smart contract risk comes first. The core contracts behind Sushi Swap have been running for years and reviewed many times, but the wider system has been exploited more than once. In April 2023 a bug in a newly deployed router let an attacker take roughly 3.3 million dollars from wallets that had granted it approvals, with a meaningful portion recovered afterwards. Two years earlier, a supply chain attack on the launchpad front end redirected the proceeds of a token sale.
Token approvals deserve their own paragraph. Trading through any router means granting a contract permission to move a token out of your wallet, and unlimited approvals stay live until they are revoked. The 2023 incident harmed people who had approved a contract, not people who had deposited into a pool. Reviewing and revoking stale approvals is the cheapest risk reduction available to anyone using Sushi Swap regularly.
Then there is the risk that has nothing to do with code: buying the wrong token. Permissionless listing means an impostor pool can exist under any well-known name, on any chain. Sushi Swap will quote a price for a counterfeit token as readily as for a real one, because the contracts cannot tell the difference. Verifying the contract address from an independent source, rather than trusting whatever a search box surfaces inside any interface, is the habit that prevents most of these losses.
Impermanent loss, described earlier, remains the main hazard for liquidity providers, and it is routinely underestimated because reward yields are advertised prominently while divergence is not. A Sushi Swap position in a volatile pair can end up almost entirely in the weaker asset, and a concentrated position can drift out of range and stop earning while the market runs away. Sushi Swap exposes the position data; interpreting it is the provider's own job.
Finally, the regulatory picture is unsettled. The project disclosed a subpoena from United States regulators in 2023 and funded a legal defense through governance, and the rules covering decentralized exchanges keep moving in most jurisdictions. Anyone using Sushi Swap should assume that the legal and tax treatment in their own country is entirely their responsibility, because there is no intermediary standing by to handle it.
14Chronology of notable events
A short chronology helps, because a great deal of what people believe about Sushi Swap dates from one specific moment rather than from the present state of the protocol.
The entries below cover events that were widely reported at the time. They are not a complete governance history, which by now runs to hundreds of proposals and thousands of forum posts.
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August 2020
Sushi Swap launches as a fork of Uniswap V2 with the SUSHI reward token, published by the pseudonymous Chef Nomi, and begins paying emissions to people who stake a rival's liquidity provider tokens.
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September 2020
Chef Nomi converts the development fund and then returns it after public pressure; control passes briefly to Sam Bankman-Fried and then to a community multi-signature wallet, and the migration moves the staked liquidity into Sushi Swap pools.
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2021
Expansion of Sushi Swap across many chains, alongside BentoBox, Kashi, the MISO launchpad and the Onsen incentive program. A supply chain attack on the launchpad front end steals the proceeds of a sale.
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Late 2022
Token holders elect Jared Grey as head chef during a long public debate about treasury runway, contributor costs, and whether the token economics were sustainable.
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2023
A router bug is exploited in April for roughly 3.3 million dollars, part of which is later recovered. Concentrated liquidity pools are deployed across chains, and the project discloses a subpoena from United States securities regulators and funds a legal defense.
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2024
Sushi Labs is established to carry out day-to-day development and operations, with the DAO retaining authority over the treasury and the token that funds Sushi Swap.
15How to get started
Using Sushi Swap for the first time is mostly a matter of preparation. The sequence below assumes a self-custodial wallet and a deliberately small test amount, because the cheapest lesson is the one that costs a few dollars.
None of this is a recommendation to trade. It is a description of the order of operations, so the first attempt is not also the first time you see an approval request and have to guess what it means.
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Step one
Set up a self-custodial wallet
Install a reputable browser or mobile wallet, write the recovery phrase on paper, and store it away from the device. Nobody at Sushi Swap can restore that phrase for you, and anyone who asks for it is stealing from you.
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Step two
Fund it with the chain's gas token
Every transaction needs the native token of the network to pay for gas. Trading on Sushi Swap on a rollup usually costs a fraction of what the same trade costs on Ethereum mainnet, which is why beginners often start there.
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Step three
Choose the network and verify the pair
Select the chain your funds are actually on, then confirm both token contract addresses against an independent source. This is the single step that prevents the most common and most expensive beginner mistake on Sushi Swap.
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Step four
Connect, read the quote, and set slippage
Connect the wallet, enter a small amount, and read the price impact and minimum received before anything else. Adjust slippage only if the trade fails for a reason you understand.
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Step five
Approve, swap, then review
The first trade of a given token needs an approval transaction before the swap itself, so expect two signatures. Afterwards, check the result on a block explorer and revoke the approval if you do not plan to use Sushi Swap again soon. If you intend to provide liquidity rather than trade, read the section on impermanent loss first.
16Who it suits and who it does not
Sushi Swap suits people who want custody of their own assets, access to tokens before or without a centralized listing, and the option to earn from providing liquidity. It fits poorly for anyone who needs fiat on-ramps, a customer support line, or the ability to undo a mistake, because none of those exist in Sushi Swap and none can be added without changing what it is.
For liquidity providers, the honest test is whether you will actually monitor the position. Classic Sushi Swap pools tolerate neglect and pay less for it; concentrated positions pay considerably more and punish inattention with weeks of idle capital. Choosing the style that matches your temperament beats chasing the higher advertised return.
For anyone interested in governance, the SUSHI token is the entry ticket, though a meaningful voice usually requires either a large balance or the patience to argue well in public. The Sushi Swap forum has been unusually candid about its internal disagreements, which makes it a good place to learn how a DAO really operates and a slow place to get anything decided.
17Frequently asked questions
Is Sushi Swap the same thing as SUSHI?
No. Sushi Swap is the exchange protocol, the collection of contracts that hold pools and execute trades. SUSHI is the token used for governance and, historically, for fee sharing through staking. You can trade on Sushi Swap without ever touching the token.
Do I need an account or identity verification?
The contracts have no accounts and perform no identity checks; a wallet is all that connects to Sushi Swap. Interfaces and jurisdictions may impose their own restrictions, and local rules on reporting and taxation still apply to you personally.
What does a trade cost?
Three things: the pool fee, the price impact of your own order, and network gas. The pool fee on classic pools is commonly 0.30 percent, concentrated pools use tiers, and gas is paid to the blockchain rather than to Sushi Swap. On small orders, gas is often the largest of the three.
Can impermanent loss be avoided?
Not eliminated, only reduced. Pairing assets that track each other closely limits divergence, and fees plus incentives can outweigh what remains. Providing liquidity on Sushi Swap in a volatile pair during a sharp price move will normally underperform simply holding the two tokens.
Is it safe to use?
The core pools of Sushi Swap have a long operating record, but the protocol has suffered exploits at the periphery, including a router bug in 2023 and an attack on a launchpad front end in 2021. Treat smart contract risk as real, keep approvals tight, verify token addresses, and size positions accordingly.
Which blockchains are supported?
Dozens, spanning Ethereum, the major rollups, and numerous alternative networks. Support and liquidity vary widely between them, so check the depth of the specific pool on the specific chain before assuming that Sushi Swap will fill a large order there.
Does the Chef Nomi episode still matter?
Historically yes, operationally much less. The funds were returned in 2020 and control moved to community governance, which has run Sushi Swap ever since through votes, elected signers and, more recently, a dedicated operating entity. The episode remains a useful reminder that anonymous founders and admin keys are a risk to be assessed, not a detail.