AMA Highlights: Sigmadex
By Daniel Dal Bello, Director.
May 11, 2021–5 min read.
On Friday 7 May, we welcomed Peter Danihel of Sigmadex into the Hillrise Group Telegram chat for a conversation about their Polkadot-based liquidity protocol for seamless cross-chain trading — tackling many of the problems found within a highly fragmented niche.
The protocol is underpinned by game theory mechanisms with governance token rewards to incentivize liquidity to remain within Sigmadex.
We were excited to learn more about Sigmadex and its innovations in providing stronger liquidity.
In this post, we have compiled key questions and answers from the event.
Welcome Peter and thank you for being here. We have been planning this for a while and we know you’re busy with preparations for TGE, so thanks for your time.
Could you start with an introduction to yourself and what you’re building at Sigmadex?
I am a self-taught software engineer, been in the crypto-space since early 2012.
At Sigmadex we are building a unique liquidity protocol that is powered by game theory and is solving market manipulation issues that currently plague other protocols.
At the core of almost every crypto-product already lies some components of game theory.
What is unique about your project is game theory is very much at the forefront of your messaging.
What are the core components of your game theory implementation and why is it important?
We believe the biggest differentiating factor with Sigmadex vs. others is that we have taken several elements from traditional finance and have combined them to create the ideal ecosystem for individuals (both retail and institutional) to provide liquidity.
Creating appropriate incentives and balancing the economics is part of our core foundation in Sigmadex.
At what point do you think the addition of more robust game theory mechanisms becomes “too much”, where it begins to limit participation?
As you guys probably know, game theory can be very complex. Integrating the right amount and using the proper formulas are crucial and there is definitely a point where it can hurt the project.
It’s not really a matter of how much game theory is added, it’s more about what components were gamified and how they affect the overall “playability”.
The last thing we want is for people to be repelled because the elements are too complicated or offer no benefit to the users.
Since you have created a foundation that is developing a protocol with a vision for decentralized governance, could you elaborate more on the structure of Sigmadex?
The (legal) parties involved in the development and the road ahead to true decentralization.
The ultimate goal for Sigmadex is [to be] “ownerless”. Sigmadex isn’t in the business to generate revenue. We are creating infrastructure that is supposed to last forever and governed by its community (token holders).
The overall structure is actually quite simple, we have developers contributing daily to improve the protocol and with steady adoption and development, our team will be able to continue to scale the project from awareness and token appreciation.
Is your foundation registered anywhere legally? And what role will this Sigmadex Foundation play once the protocol is live and community governed?
We are registered in BVI (British Virgin Islands) and have developers in Asia, Europe, and Canada.
The foundation itself will continue to explore growth strategies for the protocol and continue to invest (both time and capital) into creating more compelling assets for the DeFi community.
Many projects including yours are being built on Polkadot. All the while, Polkadot has seemed to lose a lot of steam lately with uncertainty in their development.
Do you see this as a problem? Are you considering any alternatives?
We have prepared for delays in the Polkadot roadmap by having our first iteration deployed on Binance Smart Chain.
A lot of our smart contracts are already written in Solidity and will enable us to have a version of Sigmadex running prior to Polkadot’s relay chain launch with parachain support.
We’ve found a very clear and easily digestible explanation of Sigmadex’s unique constant function market maker algorithm — utilizing an order book where all liquidity is pooled into one to solve the problem of having an asset market with changeable liquidity pools consisting of many limit orders which would leave too much discretion in the determination of the liquidity parameter.
Could you walk us through the development and thought process behind this model?
The thought here has been to simplify things. Managing an on-chain order book isn’t a very efficient way of doing things.
Instead what we have proposed here is measuring liquidity from several sources in order to regulate the amount of liquidity available to each individual asset.
This is actually even better for security and makes it tougher for market manipulators.
This approach seemingly comes with its own challenges — notably with regards to non-optimal arbitrage and front running. Proposed solutions are minimum orders and gas fee restrictions.
Could you elaborate on the specifics and considerations made with regard to participant accessibility (small orders) and trading experience (speed/gas restrictions)?
Front running can be solved with gas fee restrictions and shouldn’t be a problem on Polkadot. Since DOT doesn’t require an insane amount of computational power, the fees will be much less than traditional PoW consensus.
We will continue to experiment with small orders and what limits to place. It’s tough to say at the moment because we do not want to place limitations on order sizes if we don’t have to. Since Polkadot’s network fees are very small in size we can foresee people using DEXs more than CEXs in the future.
Platforms like yours propose providing incentives for users to provide liquidity, which has become very common.
How are you designing the emissions system to keep liquidity incentivization sustainable?
A large portion of the tokens (40%+) is dedicated to network incentives. Early protocol adopters will have the opportunity to earn more rewards and have more incentives which will benefit users as we continue to build out our infrastructure.
We also have a deflationary monetary policy in place to ensure our token remains strong while we continue to expand our game theory elements and make our protocol more attractive when compared to the competition.
Hillrise Group supports ambitious Web3 startups with early-stage venture capital and fundamental research.
Sigmadex is a decentralized perpetual liquidity protocol infused with game theory powered by Polkadot.