The Sigmadex protocol utilizes a unique Monetary Policy that is enhanced with a reward/penalty system. This policy is engineered to provide maximum liquidity for its users while strengthening the overall ecosystem.
To get started, a user would stake their native Sigmadex tokens on the platform along with a secondary token for a predetermined period of time injecting liquidity into the market. From there, a number of outcomes can occur regarding the penalties and rewards the stake can experience.
Below is an info-graphic illustrating how over time, penalties and rewards are distributed variably.
Examples
Below we explore examples of how a user’s stake can be affected by the penalty and reward system on Sigmadex on opposite ends of the distribution scale.
Scenarios that fall in between the two have rewards and penalties distributed according to the liquidity graph.
The longer the duration of the stake, the higher the APY earned. The shorter the duration of the stake, the lower the APY earned.
Penalties for early withdrawal of stake are higher the earlier the withdrawal occurs and become lower as time progresses.
Scenario 1
Bob decides to stake their tokens for 365 days without unlocking their stake prematurely.
- Bob receives the maximum APY reward + an appropriate bonus which comes from people who removed liquidity and incurs no penalties for premature withdrawal.
Based on the liquidity graph, the stake would receive the maximum APY rate and no penalty. He would have the ability to call the restake function to renew the contract after the 365 days is up or block 5,236,666 is mined 3.154e+7/6. Restaking the contract will increase the next terms APY rate by multiplying the last terms APY rate li with the interestMultipler function.
Scenario 2
Arthur decides to stake his tokens for 365 days but wishes to unlock his tokens at on day 182 of a 365 day stake.
- Arthur receives no reward and incurs a penalty relative to the time remaining on the contract which follows the formula:
$$f = (p+i)-n^1$$
$$n = i(x)\frac{(1 - 0.99^{t-l})}{(1 - 0.99^{-l})}$$
| Variable | Value | Description |
|---|---|---|
t |
182 | Days into the Contract |
l |
365 | Stake Length |
i |
100 | Principal Amount |
x |
60 | Maximum Penalty Rate in Percent |
Scenario 3
Sally decides to stake her tokens for 365 days but wishes to unlock their tokens after 1 day as she forgets she needs her capital to pay some bills.
- She would receive no reward and incurs the maximum penalty for calling the
withdrawfunction before the blocktime has reachedCurrent Blocktime + 3.154e+7
Based on the standard penalty formula, removing the liquidity early would receive no APY rewards and incur the maximum penalty possible.
Role of the Sigmadex Native Token in Penalties
When staked liquidity is added on Sigmadex the collateralization is derived via two components:
- Sigmadex native token
- Secondary liquidity token
The native token has a number of functions that are utilized by the marketplace as a whole.
Firstly, if stakes are prematurely unlocked, an important part of the token flow is the deflationary mechanism which reduces the overall token supply.
As these penalties are executed the secondary collateralized coin goes into a pool which awards these penalty fees to those who follow the protocol and complete their staking cycles.
Benefits of the Sigmadex Ecosystem
By utilizing the above-mentioned monetary policy, the Sigmadex ecosystem is able to generate perpetual liquidity for a wide variety of crypto assets. Sigmadex displays the amount of liquidity locked up under any asset showcasing the overall "health" of each pair. When individuals want to trade, they can confidently engage in exchanging knowing their asset values will remain stable as the lack of liquidity in the market they are participating in will be clearly visible.
