Tutorial: Trading Tax Tokens on Sushi
The decentralized finance (DeFi) ecosystem continues to grow, offering a wide array of tokens to trade. One peculiar category you might come across is "tax tokens"—tokens that have an in-built tax for buying or selling. This guide aims to help you navigate the intricacies of trading tax tokens on SushiSwap.
What are Tax Tokens?
Tax tokens are cryptocurrencies that have a built-in transaction fee, or "tax," for each buy or sell order. The tax usually serves specific functions such as providing liquidity, rewarding holders, or funding a project's development. Trading these tokens can be a bit different than what you're accustomed to, primarily because of the embedded tax.
Trading Tax Tokens
While trading tax tokens used to be a bit of work, Sushi's "Automatic Tax Token Support" now offers a straightforward way to recognize and accommodate these unique tokens.
Sushi automatically detects when you're trading a tax token and directly integrates this information into the transaction process. Upon initiating a swap that involves a tax token, the interface promptly displays the applicable tax percentage.
If you're trading a token with a 3% tax, there's no need to tweak your slippage settings — the platform automatically shows it and accounts for this, ensuring your transaction is processed smoothly without additional steps. Note: you will only be able to see the token tax % after approving your token to be swapped.
This eliminates the guesswork and the need for manual slippage adjustment, greatly simplifying your trading experience. Read the full announcement here.
Trading Tax Tokens Before: A Tale for the Curious
(You can totally skip this if you're here for the 'how to trade tax tokens' information.)
Previously, a persistent "low slippage" warning often hinted at a tax token. Traders would need to manually adjust their slippage tolerance to account for the token's tax, adding complexity to transactions.
When you encounter this warning message, the next step is to adjust your slippage tolerance. The tax imposed by the token needs to be factored into the slippage settings. For example, if the token has a 5% tax, you would add that to your original slippage tolerance—let's say 0.5%. So, you'd set your new slippage tolerance to 5.5%.
Now that you know how it works. Enjoy the convenience of the New Automatic Support on Sushi!
