How and Why to Use Sifchain’s Decentralized Exchange
We are grateful to see such strong engagement on Sifchain’s BetaNet. The Rowan token has been in high demand and we are hosting over $10M in total value locked (TVL) just a few days after launching!
Now is a good time for us to explain a few key points about using our decentralized exchange (DEX).
Setup with Keplr and Metamask Wallets
In order to take full advantage of the Sifchain DEX, you must have a Keplr wallet for managing assets on Sifchain and a MetaMask Wallet for managing assets on Ethereum. Check out our article about getting started.
Swapping and Pooling
Pegging: Transferring Assets from Ethereum to Sifchain
Most new users will start out with their assets on the Ethereum network and will need to peg them to the Sifchain blockchain through our Ethereum — Sifchain bridge: Peggy.
In order for Sifchain to allow for cross-chain support and free movement of assets between chains, we have implemented a concept named Peggy. Simply put, Peggy allows people to freely move assets that exist on one chain to another, use those assets in that chain, then move those assets back to the source chain. Check our our article about the Peggy concept.
We recommend that anyone who wishes to peg assets onto Sifchain include a small amount of Rowan from Uniswap (which is listed on Ethereum as eRowan). Most of the liquidity for Rowan is on Sifchain’s BetaNet, but Rowan is required on Sifchain to pay for gas, so buying a small amount of Ethereum beforehand is recommended. Likewise, to unpeg assets from Sifchain to Ethereum, you need cETH which you can buy on Sifchain’s DEX. We are considering new features to simplify gas usage (e.g. building a Rowan faucet so that new Sifchain addresses will receive a small amount of Rowan when they peg a new asset).
Swapping: Exchanging Tokens on Sifchain
Sifchain allows users to swap any asset on any bridged chain (like Ethereum) for any other assets. Rowan is the settlement token for all of Sifchain’s liquidity pools. Therefore, all liquidity pools contain an external asset like ‘ETH’ or ‘SNX’ and Rowan. Check out our article about swapping!
Sifchain’s Betanet DEX supports swaps across a wide variety of popular assets. As of now, it supports USDT, ETH, BAT, ANT, BNT, ZRX, LINK, MANA, LRC, ENJ, SNX, TUSD, OCEAN, FTM, SUSD, USDC, CRO, WBTC, SXP, BAND, DAI, COMP, UMA, BAL, YFI, SRM, CREAM, SAND, SUSHI, ESD, UNI, AAVE, BOND, WFIL, GRT, LON, 1INCH, RUNE, WSCRT, IOTX, REEF, and of course, ROWAN. Additional tokens are coming soon. Tell us on Telegram if you have any requests!
Pooling: Providing Liquidity in Liquidity Pools
Liquidity providers can add liquidity into Sifchain’s liquidity pools where they earn income. Liquidity providers should be able to deposit any token Sifchain supports to the appropriate pool. Liquidity providers can add or remove liquidity whenever they choose. Check out our article about liquidity pooling!
Liquidity providers can add liquidity asymmetrically, meaning they can add only Rowan or only TKN for any token, or unequal amounts for their tokens. This is as opposed to Uniswap where users must add equal values of the settlement token (ETH) and the other token (TKN).
Sifchain uses a slip-based liquidity fee, pioneered by Thorchain. When swappers are swapping low volume relative to the pool, they pay less in fees than on Uniswap. When they are swapping high volume relative to the pool, they pay more in fees than on Uniswap.
Swappers benefit under normal conditions while poolers benefit during periods of high volatility when swappers are willing to pay more in fees to change their position. In a single market cycle, swappers and poolers *both* profit more under the Sifchain swap fee than the Uniswap fee.
Validator Subsidy Rewards
Sifchain is running a 12-week validator subsidy program that started on Feb 19 at 5:00 AM GMT alongside the launch of BetaNet. Through this program, Sifchain will provide Rowan to poolers in addition to revenue generated from their swap fees. These tokens will come from the Sifchain ecosystem bucket reserved for the growth and enhancement of the Sifchain ecosystem.
The validator subsidy rewards are distributed across all liquidity providers, meaning they will start out extremely high and naturally fall as more liquidity is provided. As of the writing of this post, over $10M of liquidity has been provided in Sifchain liquidity pools and the validator subsidy rewards are set to about 400%.
Unlike standard liquidity pool fees from the slip-based liquidity fee formula, validator subsidy rewards cannot yet be claimed. We are building a module for the distribution of validator subsidy rewards and other ecosystem tokens; we estimate it will take about two more weeks to complete. While validator subsidy rewards are accumulating as of the start of the program (Feb 19 at 5:00 AM GMT) they can only be claimed when the module is completed. Rewards earned prior to the completion of the module will be distributed when it is completed to addresses that have withdrawn their liquidity; addresses that keep their liquidity in can continue to earn more rewards with no action.
To simplify the understanding of the pooler validator subsidy program, we are switching to Ampleforth’s Token Geyser model for distributing validator subsidy tokens. Rewards start out with a multiplier that increases the longer a pooler holds their tokens in a liquidity pool. For Sifchain, the maximum multiplier comes after four months of pooling.
Staking and Delegating
Sifchain’s active validator set consists of the top 100 nodes, as measured by total stake. The calculated total stake includes both the validator’s individual stake and all of its delegations. This validator set is refreshed every block, so changes to a validator’s total stake that would shift it in or out of the validator set will be reflected in consensus almost immediately. There is no explicit minimum stake amount required to be a validator on Sifchain. The amount staked by the lowest validator in the set serves as an implicit minimum.
Delegation is a great way to earn validator income without running your own validator. If you want to support ROWAN’s crypto-economic security but cannot run your own validator, you can delegate your capital to a validator. Delegators earn validator tokens, minus a commission rate retained by the validator.
The commission fee is used by the validator to sponsor technical improvements to Sifchain. Validators are encouraged to offer reports about their contributions to Sifchain’s technical infrastructure. Delegators are encouraged to select validators based on their ability to support Sifchain’s technology innovations.
Staking and delegating are other ways users can earn revenue with Sifchain. Users looking to delegate can do so on Keplr. Delegating is labeled as “staking” in Keplr for legacy reasons that the Sifchain team does not control. These services earn income through a separate bucket of resources than pooling. We’ve explained the differences below.
Block rewards currently consist of revenue from transaction fees (very low) but will consist of inflation as well in the next couple of weeks (7%-20% APY) which is standard for Cosmos Network blockchains. In the meantime, the subsidy program for validators more than makes up for the difference.
Validator subsidy rewards cannot yet be claimed. We are building a module for the distribution of validator subsidy rewards and other ecosystem tokens (like the pooler validator subsidy regards); we estimate it will take about two more weeks to complete. While validator subsidy rewards are accumulating as of the start of the program (Feb 19 at 5:00 AM GMT), they can only be claimed when the module is completed. Rewards earned prior to the completion of the module will be distributed when it is completed, to addresses that have withdrawn their liquidity. Addresses that keep their liquidity in can continue to earn more rewards with no action.
Sifchain validators are currently staking 18.75M Rowan. These are NOT eligible for validator subsidy rewards as they are sponsored by the Sifchain team and should not be delegated to. They will be removed once the total amount staked and delegated on other validators grows at the platform matures.
Staking and delegating currently have a much higher subsidy yield than pooling but are also subject to a 21 day un-bonding period. Users who try to remove liquidity from these services will have to wait 21 days during which their capital will not earn yield. This is done to prevent a long range attack whereby a participant enters the validator economic subsystem, votes for fraudulent transactions which degrades the value of the capital, but then un-stakes or un-delegates shortly thereafter — no longer being subject to the degradation of the value of their capital because it has moved elsewhere.