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SMARDEX – A Platform with a New Solution to Defeat DeFi’s Impermanent Loss
The decentralized finance (DeFi) sector is rapidly growing but still faces significant challenges. For example, one of the biggest issues DeFi must address is Impermanent Loss (IL). This is a problem that can have serious consequences for liquidity providers.
Today’s review will examine how SMARDEX intends to solve the IL problem and end liquidity providers’ unjust losses. We’ll also look at all the services that SMARDEX offers and examine the project’s tokenomics.
What Is SMARDEX?
SMARDEX is a project intending to transform the decentralized finance industry. It utilizes EVM-compatible smart contracts to enable users to securely and immutably trade ERC20 tokens. In addition, advanced algorithms allow the platform to provide liquidity appropriate for each trader’s needs.
The DeFi community has welcomed SMARDEX’s approach, reflected in its increasing TVL of $33 million. At the core of this project, we find an ambitious target. This team intends to achieve a double goal:
- Solve the issue of IL in the DeFi niche
- Give the market a chance to turn IL into IG (impermanent gain)
This is a vision that could make a difference in the DeFi sphere. Its implementation would not only benefit liquidity providers but also bring more confidence to investors.
How does SMARDEX intend to achieve this? As explained below, the team’s whitepaper is a good place to start understanding how the project works.
Why Impermanent Loss Is a Bigger Issue than You May Think
As a retail investor, you may have the temptation to consider impermanent losses (IL) insignificant. However, it can represent a major risk to liquidity providers, especially with high trading volume and volatile market conditions.
When liquidity providers remove their funds, this can dramatically diminish the monetary value of assets withdrawn relative to those deposited. Furthermore, farming protocols may generate more tokens, upsetting the balance of supply and demand and dragging down a token price.
It is, therefore, essential for liquidity providers to be aware of the impermanent loss and find ways to mitigate it. The future of DeFi and cryptocurrency trading depends on it.
Understanding the dangers of impermanent loss will assist liquidity providers in continuing to provide liquidity for DeFi protocols and stablecoins. Through their efforts, the market has been able to unlock many of the DeFi benefits.
How Does SMARDEX Intend to Solve the Problem?
SMARDEX’s whitepaper introduced a protocol that could mitigate impermanent loss (IL). The team labeled this technique “Fictive Reserve (FR).” The document does a good job of illustrating how FR works and how it can balance the system.
For this review, you should consider a shorter explanation of the technical process. The project’s pool will automatically run a calculation to sell less of the token rising in price. This strategy will sell the token at a higher price later, obtaining a higher profit for the liquidity provider.
The whitepaper’s math is clear, and you can check the team’s explanation by following SMARDEX’s link to academia.edu.
The Project’s Tokenomics
SMARDEX’s tokenomics ensures a fixed supply with increased purchasing power while rewarding liquidity providers, stakers, and users. As a result, half the 10 billion SDEX tokens supply goes to liquidity pools, while 37.5% goes to long-term farming yield and staking rewards.
The remaining 12.5% goes to boost period farming yield and staking rewards. Each trade on SMARDEX incurs a fee of 0.07%, divided as follows:
- 0.05% goes directly to LPs who provide liquidity for the trading pair;
- 0.02% goes to all stakers as SDEX rewards.
This tokenomics model incentivizes users to provide liquidity and stake tokens. In addition, the team’s strategy intends to encourage an active community with a shared interest in the project’s success.
The project now supports Ethereum, but other chains will join to expand liquidity providers’ possibilities. The project’s website hints at expansion operations toward BNB Chain, Polygon, Optimism, Arbitrum, and Avalanche.
All the Services Available on SMARDEX
SMARDEX is a DeFi protocol that offers multiple services, such as swapping, liquidity provision, farming, and staking. These are all important functions of the DeFi ecosystem and can help users maximize their profits while minimizing risk.
Let’s dive into each component and see how they work without further ado.
SMARDEX protocol Staking lets you take advantage of a dynamic market and swap tokens at a low cost. You can easily deposit SDEX tokens from your Web3 wallet to start staking.
Additionally, reliable liquidity providers are always available to provide the smallest possible slippage. Follow these simple steps:
- Navigate to the Staking Tab
- Click on either the ‘+’ or ‘-’ buttons to deposit your SDEX tokens
- Manage your Staking pool accordingly, and harvest your SDEX Gains.
Crypto staking is a popular way to earn passive income, and SMARDEX intends to simplify the process for you.
“Yield farming” is another approach to gain crypto passive income. In farms, users deposit their SMARDEX LP (Liquidity Pool) tokens to generate SDEX tokens. Also, the system generates trading fees for each pool, increasing the reward for each yield farmer.
To start farming, follow just a few simple steps. First, navigate to the Farming Tab, select the pair you wish to farm, and click on it. At this point, you’ll need to approve from your Web3 wallet the management of your LP tokens by SMARDEX protocol.
Once done, you can click the “Stake LP” button and deposit your first LP amount. Next, adjust your stakes and earn pool tokens using the “+” and “-” buttons.
This project could not overlook the chance to introduce its solution for providing crypto liquidity. SMARDEX protocol allows users to supply crypto tokens and get LP Tokens in return. It is a four-step process:
- Navigate to the ‘Liquidity’ tab;
- Connect your Web3 wallet to retrieve existing liquidity deposits;
- Search for other LP Tokens that are available on the blockchain;
- Create your LP Tokens by adding liquidity to the pool.
SMARDEX’s USD token values may differ from other DEXs’ 50/50 split. This is because of the FR algorithm we simplified above. So what does this mean in practice for you? For example, suppose you want to contribute $2,500 worth of tokens. As the team puts it, you might need to use $1500 in SDEX and the remaining $1000 in WBTC.
The algorithm is careful not to cause an imbalance in the pool. It rebalances reserves as needed to maintain favorable conditions for liquidity providers. However, the project uses real reserves to add or remove liquidity, which could cause a value discrepancy between the two tokens.
Last but not least, SMARDEX introduced its swap system into the platform. It offers users a vast selection of ERC20 tokens and allows them to trade without relying on CEX.
By following four simple steps, you will be able to perform successful swap transactions:
- First of all, you can access the swap panel.
- Next, select the token you own from your Web3 wallet (e.g., Trust Wallet) and a token you wish to swap with.
- Next, approve the SMARDEX smart contract to interact with your Web3 wallet.
- Finally, perform the swap of your desired tokens on SMARDEX.
These steps ensure complete ownership of your coins and substantially reduce fees compared to conventional AMM protocols.
Final Thoughts – SMARDEX’s Role in DeFi
With its ambition to disrupt the DeFi space, SMARDEX works to become a major player in decentralized finance. Its innovative protocol promises to turn an impermanent loss into an impermanent gain. The IL issue is an ever-present threat in DeFi, so many are interested in this new protocol.
The team’s whitepaper is among the top 0.1% on academia.edu, proving its merits and potential to become a major player in the DeFi space. As SMARDEX continues to expand, it could help make DeFi more accessible and reduce the impermanent loss for users worldwide.
If you wish to learn more about SMARDEX, you can visit the official website. Alternatively, follow the team’s social media accounts to stay updated with the latest news: Telegram (Channel) | Telegram (Chat) | Twitter.
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