SMARDEX - A Project Transforming DeFi by Tackling Impermanent Loss Head-On
As the DeFi ecosystem continues to grow and evolve, the role of liquidity providers in this sector becomes increasingly important. In order to ensure its growth, finding ways to mitigate the issue of Impermanent Loss (IL) is essential.
With its AMM protocol, SMARDEX is transforming DeFi. The project provides a solution that addresses IL, with the chance to turn it into Impermanent Gain (IG). This ambitious project seeks to shake the DeFi space and make it more accessible to all.
This article will look in-depth at SMARDEX and its various features. Among these utilities, we'll find staking crypto on the platform, liquidity pools, swapping tokens, and earning passive income through farming. Ultimately, we’ll explore how this project proposes to change the DeFi space, helping create a more sustainable and profitable future.
SMARDEX - Project Profile
SMARDEX is the latest AMM to address the Impermanent Loss (IL) problem. This protocol comes from EPFL researchers, one of Europe's most prestigious universities. The project’s scientific whitepaper is in the top 0.1% on academia.edu.
It allows users to exchange decentralized ERC20 tokens securely and efficiently. Through the SMARDEX protocol, users can even experience Impermanent Gains (IG) instead of IL.
In the subsections below, we'll cover all the features this team offers, including staking, farming, and more.
The Project's Liquidity Pools
Automated Market Making has revolutionized the cryptocurrency space, allowing users to provide liquidity and earn rewards in a simple manner.
SMARDEX has entered the AMM niche by designing a way to overcome the impermanent loss inherent in most AMM systems. This provides liquidity providers (LPs) with a new opportunity to optimize their profits while maintaining the security of their funds.
The SMARDEX protocol's Liquidity Pools (LP) allow users to supply liquidity by depositing their tokens. The project converts the funds into LP Tokens. Adding liquidity is easy and done in four steps:
- Navigate to the Liquidity tab;
- Connect a Web3 wallet and automatically retrieve your liquidity deposit;
- Find other LP Tokens through the blockchain;
- Create LP Tokens for your position (i.e., deposit liquidity).
The value proposition behind these pools is the potential to earn a passive income while mitigating IL risk. This is done by allowing users to earn LP tokens, which represent a share of the pool.
Swapping Tokens
With SMARDEX, users can save on fees when they swap their ERC20 tokens. The protocol has a Swap panel that offers features for decentralized trading. This eliminates the need for Centralized Exchanges (CEXs).
In order to perform the swap, first access the Swap panel from a wallet such as MetaMask. Then select the token you possess and the one you wish to swap. After that, approve the SmarDex smart contract to interact with your Web3 wallet.
Swapping brings multiple advantages to the everyday crypto user. It simplifies the process of exchanging tokens and provides liquidity to those who want to convert their crypto assets quickly. Swapping also allows traders to avoid any restrictions associated with centralized exchanges.
Staking and Farming on SMARDEX
Passive income is one of the most sought-after ways to generate an additional source of income. Crypto provides a unique opportunity for users to benefit from passive income through staking and farming.
SMARDEX is joining this trend by offering staking and farming solutions to its users. Staking allows users to benefit from a dynamic market with minimal costs.
If you wish to start staking on SMARDEX, follow the steps below.
- Navigate to the Staking tab.
- To deposit SDEX coins from your Web3 wallet to the SmarDex protocol staking mechanism, click + or –.
- Manage your Staking pool with the appropriate button and harvest your SDEX token gains through this mechanism.
Farming also consists of a few steps.
- Navigate to the Farming tab and select the pair you wish to farm.
- Approve from your Web3* wallet the management of your LP Tokens by SmarDex protocol.
- Deposit your first LP amount and manage your stakes with – or + buttons accordingly for better gains.
Which advantages do staking and farming unlock for you? For starters, you can benefit from passive income without having to do any extra work. You will also have access to liquidity pools with good returns and lower risks so that you can maximize your rewards.
Moreover, SMARDEX provides a secure environment for staking and farming in a user-friendly interface so you can easily track your investments.
SMARDEX wants to give consumers a basic, easy-to-understand interface. With this spirit, it is possible to summarize the procedures above in only a few stages.
SMARDEX and Its Native Token - Introducing SDEX
Over the years, the trend observed in cryptocurrency has been the introduction of native tokens that represent digital assets. Crypto projects follow this trend for multiple reasons, like increased liquidity and access to more capital.
SMARDEX has also adopted this practice and created its native token: SDEX. SDEX's total supply is 10,000,000,000 tokens, divided as follows:
- 50% to liquidity pools
- 37.5% for long-term farming yield and staking rewards
- 12.5% for boost period farming yield and staking rewards
This allocation aims to increase each token's purchasing power and value. SMARDEX incentivizes loyalty by providing staking rewards to users who hold the tokens long-term, further increasing the token's value.
How Does this Project turn Impermanent Loss into Impermanent Gains?
Before wrapping up, it is fundamental to understand two concepts related to this project. The first is that impermanent loss represents a long-term threat to the success of DeFi.
A user can buy tokens from a pool with low prices and sell them in a pool with high prices. This will cause an imbalance between the two pools. The person who provides the liquid will usually lose money because of this.
So, how does SMARDEX propose to solve this issue? We'll simplify the technical method below, but the team's whitepaper will explain it in greater detail.
The team introduced a "Fictive Reserve" (FR) strategy, which utilizes two different liquidity reserves. In extremely simple terms, the project's pool will automatically run the math and sell less of the token that is rising in price. By selling this token at a higher price later, the platform leads to a higher profit for liquidity providers.
Ultimately, SMARDEX's Fictive Reserve is a powerful tool that can turn impermanent losses into gains. Interestingly, the team included in its whitepaper the results of multiple tests.
With such a strategy, users can take advantage of arbitrage opportunities without worrying about major losses in the long term.
Bottom Line - Toward DeFi Transformation
SMARDEX's approach to tackling the issue of impermanent loss is catching the attention of many in the DeFi sector. The project recorded a $33 million TVL growth in just a few days and aimed to launch on multiple chains. This will further increase liquidity and attract more users to its platform.
Ultimately, projects like SMARDEX are pushing the boundaries of DeFi and making it more accessible to new users. The market will have the chance to observe the results of such projects in the near future.
SMARDEX's social media channels are open for any questions. Furthermore, the project's website and whitepaper are available for those who want to dive deeper into its functionalities.
