Sigmadex is an upcoming decentralized exchange, built on the Polkadot Substrate framework that is built from the ground up to be fast, cheap, and cross-chain compatible.
The world has seen a transformative shift through the DeFi ecosystem. With the advent of the blockchain, individuals and groups alike are beginning to envisage a financial system that is devoid of any negative aspects. However, in craving for a system that exhibits fairness, transparency, and accountability, there are still issues that have to be dealt with.
It is from the perspective that Sigmadex is attempting to bring onboard their solutions to problems that have become a dark spot on the growth of the cryptocurrency ecosystem.
The team contains seven (7) core members, listed in the light paper of the company. The team also boasts of the guidance of advisors, rich in experience and depth in the blockchain space.
What is Sigmadex?
Sigmadex is a decentralized protocol that boasts of a robust decentralized exchange and brings a whole new model of liquidity to its users. Sigmadex boasts of an innovative liquidity pool built on the Substrate framework. What this means is that Sigmadex will be ultra-fast, cheap, and interoperable with multiple blockchains available.
The ingenious use of game theory by Sigmadex supposes that as an entity, it can harness the game theory elements, by taking the best of traditional finance and introducing it into DeFi, through the mechanisms of time lock liquidity. This entails that when a user locks up their liquidity on Sigmadex, they enter into a game, where their direct involvement in the protocol can have a number of different outcomes, whether good or bad outcomes. However, if users follow the protocol correctly, they are entitled to receive the maximum reward for doing so in the form of transaction fees, interest rewards, and penalty pool rewards in addition to their initial capital.
However, if users do not follow the protocol as laid down by the dev team, they will receive a penalty relative to the duration of their involvement. For clarity, the earlier a user removes their liquidity, the more severe the penalty is received.
Sigmadex has set itself apart from all other platforms as the first protocol to explore, impose and strictly adhere to the use of game theory as a key component of the overall function of the platform.
Problems and solutions
There are some key issues that if fixed, Sigmadex believes the crypto ecosystem would be the better for it. Also, if fixed, it could bring about a long-lasting and cutting-edge solution to the current exchange landscape.
High rate of Latency
This is the delay that occurs between a user’s action and the response of an application to that action. When this delay is high enough, problems can spring up. These problems can go ahead to affect the exchange assets, especially if the price of those assets fluctuates within that delay. Not only does high latency affect the price of an asset, but it also can require an additional cost to process the transaction order itself.
Many people who are already familiar with DeFi, will know that current congestion on networks has resulted in an all-time high transaction fee, thus, resulting to slow and perhaps inaccurate transactions.
Solutions to latency as thought out by Sigmadex is to have a system that provides an accurate price for any asset that is being brought with no additional fee for having to process the transaction. Sigmadex combats this latency problem by being built on Substrate, which is a modular blockchain framework. This allows for prebuilt or custom blockchains, running with lower and less risky latency. As such, what this solution brings is more accuracy and faster transactions.
This is another massive problem in the exchange landscape. Without proper security, exchanges are prone to hacks and exit scams, where hundreds of millions of dollars have been stolen from investors. To combat security vulnerabilities, and also ensure as much security as possible in the ecosystem, Sigmadex Subrate’s unique security features. It also uses its own individual blockchain, where an exchange of data with one another is guaranteed. In this way, substrate secures the blockchain it is linked to, without inheriting any security flaws from the individual blockchains themselves. This additional layer of security bolsters all security layers below it and makes the possibility of hacks and exit scams almost impossible. This in turn creates a more stable and secure liquidity-filled ecosystem for everyone.
Know Your Customer (KYC)
This is a primary requirement on many existing decentralized exchanges. That is to say, not only does this cause a barrier for those that are approaching the financial landscape for investment opportunities, but also goes against the founding principle of bitcoin and cryptocurrency in general, where anonymity and privacy are promised to the end-user.
Sigmadex continues to deliver on the promise of anonymity without demanding for the customers KYC. For many of the users on Sigmadex, it allows for the free flow of liquidity to take place, without any barriers whatsoever.
Many platforms set a fixed ratio that dictates how much collateral is needed for purchasing any variety of assets. The problem with this is an individual would need the same amount of collateral, no matter the price of the asset. Platforms like Synthetix, for example, require a 600 percent collateralization ratio, which can stop an investor in their tracks. since they cannot afford.
Overcollateralization is a huge problem for Synthetix yet the platform still has one and a half billion dollars locked up. Now, the reason these ratios are so high is that this is such a volatile market. But Sigmadex has a unique solution using an algorithmic collateralization ratio based on the Sigma risk index.
Essentially, they take the short-term and long-term average volatility of the BTC and USD pair and use it as a gauge for market volatility. When the market is more volatile, the collateralization ratio increases, and when it is less volatile, it decreases. Having this algorithmic process is better than any specific scenario.
Thus, Sigmadex solves the problem, by calculating the collateral required dynamically using the Sigmadex risk index, which uses a formula that takes into consideration the price fluctuations of an asset. After this, a thorough determination of the collateralization is done by Sigmadex, which ensures that with lower collateralization requirements, more people can enter the market with less capital.
The anatomy of Sigmadex’s reward system comes from the rewards available in the ecosystem. Here, rewards are allocated by using the game theory, which has taken a brilliant acceptance from users at the testing stage.
Sigmadex (SDEX) Token
SDEX can be used for various purposes, like the addition of liquidity to token pools, collateralize assets, inflation rewards, and various protocols; changes and implementations. The SDEX token can also be used for governance, whereby holders can propose and vote on protocol changes with regards to new feature implementations and other variables such as interest rate.
The native tokens for Sigmadex serve several purposes and are an incentive to the users, where users receive reward tokens for on-chain governance, coordination and feature implementation.
There will be a total of one billion tokens, with ten percent dedicated to the seed round. Also, seven percent will be released for the strategic round, while two and a half percent will be dedicated to the private round and 10 percent will be sidelined for the team and 2 percent dedicated to the long term investors, while 20 percent will inadvertently go for future developments and just fewer than 50 percent of the token will be reserved for the ecosystem rewards that users are eligible for. It should be noted though that the company will not sell their token, so the only way to get tokens is to obtain them, legally, from the early investors or by providing liquidity to the platform. In all of this, the tokenomics of Sigmadex encourages locking in liquidity for the long term, where users can earn as much as 50 percent, with two-year locked liquidity.
Sigmadex is dedicated to playing its part in encouraging the growth discourse of the crypto ecosystem. With the team working towards a completely decentralized future, replacing counter-party risk with the adoption of intelligent algorithms to detach emotions and greedy entities from handling investors’ money carelessly.