Synthetic assets: a recent implementation into the world of DeFi have swiftly gained popularity within the crypto-industry. The total value locked in Synthetix; the largest synthetic asset DeFi platform is an astonishing $1.82 billion USD. This  rate of mass adoption makes fundamental sense as there are several amenities that occur when one buys a synthetic asset or a cryptocurrency that is pegged to a conventional stock rather than the stock itself.

Synthetic Assets vs. Conventional Stocks

For one, anyone in the world can own any stock through purchasing its associated synthetic asset regardless of their respective government limiting stock purchases for the conventional stock. Second, due to crypto’s marketplace running 24/7 this synthetic asset can be traded at any point in time rather than in the conventional stock market where in the USA for example, one can only trade their asset between 9:30 am -4:00 pm on weekdays.

Another key benefit of synthetic assets aside from it being paired to conventional stocks is it's ability to be pegged to a token native to a completely different blockchain than the one an investor currently uses.

For example if one wanted to purchase a Polkadot token on Cardano’s blockchain and DOT was not mintable on Cardano the investor could simply buy a synthetic asset that was pegged to DOT’s marketplace evaluation on Cardano’s blockchain.

The Current Issue with Synthetic Assets

However if an investor were to collateralize synthetic assets pools and take out loans without the proper algorithmic evaluation they would often have to provide over-collateralization. As a result this reduces the availability of Synthetic assets for the average investor since these collateral loan rates would not provide pragmatic access for an investor with low starting investment capital. This is where Sigmadex comes into play.

“Overcollateralization creates a high barrier to entry for DeFi newcomers and capital restricted retail individuals who want to enter decentralized finance. Sigmadex and its risk engine brings this barrier down by utilizing proprietary technology for all temperatures of investment risk”.

- Roland Haggins, Sigmadex Co-Founder

The Sigmadex protocol utilizes algorithms that consider Bitcoin (BTC) as the central data point for evaluating market fluctuations and thereby volatility of the market to determine collateral requirements for these synthetic asset pools and for taking out associated loans. This is in stark contrast to relying on community voting to determine collateral requirements which doesn’t often accurately represent true market movements which reduces the security of one’s collateral sufficiently covering loans and synthetic asset creations.

Sigmadex also takes into account 3 EMA from average cycles (3 years each):

$$(C – P) * \frac{2}{n+1} + P$$

In order to get a multiple term perspective on the entirety of the crypto space.

As a result the highest risk-tolerance will be considered in their collateral requirements to assure higher security of collateral sufficiency under the circumstances of quickly changing volatility in the marketplace.

It is crucial to understand the concept of EMAs, the Risk Index ensures to integrate EMAs to obtain important market signals. All these indicators are used in predicting the movement of securities and digital assets in the future.

True Market Representation

As this algorithm is constantly changing to market conditions, it holds dynamic value. This is in contrast to conventional collateral evaluations from community voting which is often both inaccurate to market conditions and becomes a static value due to inefficiencies and impracticalities of constantly re-inputting a community vote to evaluate collateral requirements.


Sigmadex's ability to significantly reduce Impermanent Loss for liquidity providers has provided ingenuity within its algorithms in an effort to provide a dynamic evaluation of collateral requirements.

This evaluation is an objective means of maximizing the security of synthetic asset creations and for taking out loans. Automation assures that it is always fairly balanced to the market’s current volatility conditions. The intention for Sigmadex through these protocols is to revolutionize how synthetic asset creations and loans will be implemented throughout Decentralized Finance.

Read our other articles in this series to learn exactly how each of these mechanisms works to create the new-age DEX within the DeFi crypto-space. For the savvier mathematical and/or computer science readers check out our Lightpaper for an in-depth explanation of each of our components; The validity of which is verified through auditable mathematical models.