Decentralized finance, or DeFi, has grown rapidly over the past few years, but many platforms still face challenges when it comes to making the best use of capital. SushiSwap, one of the leading decentralized exchanges, that introduced a approach called sub-NFT liquidity strategy. This upgrade was launched with SushiSwap V3 in May 2023, is designed to help users earn more from their assets while reducing wasted capital.

The idea is simple, instead of spreading assets across a wide range of prices, users can now focus their funds in smaller, more targeted price ranges. This concentrated method increases efficiency, helping liquidity providers earn more fees with the same amount of capital.

From V2 to V3

In earlier versions of automated market makers (AMMs), such as SushiSwap V2, liquidity providers had to split their funds evenly between two tokens (for example, ETH and USDC) and make them available across the entire price spectrum. That meant most of the capital sat idle because trades only happen in a small price window at any given time. With SushiSwap V3, liquidity providers can choose specific ranges. For example, someone could set liquidity between $2,000 and $2,800 for ETH/USDC. If trading happens in this range, their funds earn fees. Because the funds are concentrated, the returns can be up to 10 times higher compared to the older model.

 

 

 

Another innovation in V3 is how positions are represented. Instead of being simple tokens, each liquidity position is now an NFT (non-fungible token). This means the position is unique and can be traded, transferred, or even used as collateral without needing to withdraw the funds from the pool. These NFTs can also be combined with other parts of the SushiSwap ecosystem. For example, users can place their liquidity NFTs in BentoBox, SushiSwap’s vault system, and then use them for staking in SushiBar or lending in Kashi. This creates a “double-dipping” effect, where the same assets can earn multiple streams of rewards.

Boosting Returns with Layered Strategies

Community reports show how powerful these strategies can be. A user who puts $2,000 into a V3 pool might earn about 15% APY just from trading fees. By staking the NFT in SushiBar, they could add another 5–10% in rewards. Tools like the RouteProcessor 6 (RP6), which works across more than 40 blockchains, also help users find the best swap prices, increasing efficiency further.

In 2025, SushiSwap partnered with automated liquidity managers (ALMs) such as Steer and Gamma. These tools adjust ranges automatically to reduce losses when token prices move outside the chosen window, making it easier for everyday users to take part without needing constant monitoring.

Growth and Expansion

This strategy has already started showing results. Data from DeFiLlama in September 2025 reported that SushiSwap’s total value locked (TVL) had climbed to around $450 million, with V3 pools making up about 60% of that growth across Ethereum, Arbitrum, and BNB Chain.

In July 2025, SushiSwap expanded even further by bringing its V3 model to Solana through the Wara platform. Solana’s fast transaction speeds allow more efficient trading and support the growth of these sub-NFT features.

At the same time, Sushi DAO made financial changes to secure its operations. After losing $30 million due to unsustainable incentives for liquidity providers, the DAO decided to convert about 70% of its treasury into stablecoins. This move helped stabilize the project and build trust among its users.

Risks and Challenges

Even with all these innovations, risks remain. Smart contract vulnerabilities, market volatility, and the complexity of strategies can create problems for users. For example, if token prices move outside of the chosen range, funds stop earning fees until adjustments are made. This requires users to monitor positions or rely on automated tools.

There is also the challenge of user education. Many new participants in DeFi might find strategies involving NFTs, staking, and lending too complicated. SushiSwap will need to simplify its tools and provide guidance if it wants to attract a larger audience.

Timeline of Key Advancements

SushiSwap’s progress can be tracked through these milestones:

• May 2023: Launch of V3 concentrated liquidity pools across 13 networks.
• April 2024: Sushi DAO establishes a framework for multi-token governance.
• Q2 2025: Partnerships with Steer and Gamma bring automated liquidity management.
• July 2025: Wara platform integrates Solana into V3 for higher performance.
• September 2025: Treasury stabilizes with $163.91 million TVL across networks.

The Bigger Picture

SushiSwap’s sub-NFT liquidity strategy is more than just a technical upgrade. It represents a wider trend in DeFi: moving from simple, broad systems to precise, flexible, and composable models. By combining concentrated liquidity with NFTs and layered yield strategies, SushiSwap has positioned itself as a serious competitor to giants like Uniswap and Curve.

Looking ahead, experts believe that if adoption continues, SushiSwap’s total value locked could surpass $1 billion by 2026. Achieving this will depend on how well the platform manages risks, simplifies complex strategies for users, and maintains strong security through regular audits. In many ways, SushiSwap is showing what the next stage of DeFi could look like: more efficient use of capital, smarter tools for investors, and greater interoperability across blockchains.