SmarDex (SDEX)
SDEX is the native token of a decentralized exchange (DEX) that aims to tackle one of the most persistent challenges in the world of decentralized finance (DeFi) — impermanent loss. This DEX is one of the first attempts to offer a solution to impermanent loss, a problem that has long been a concern for liquidity providers in the DeFi space. The details of this solution are outlined in a scientific paper titled "The SMARDEX Protocol: A Novel Solution to Impermanent Loss in Decentralized Finance." [1]
The problem of impermanent loss
Impermanent loss is a phenomenon that occurs when the price of assets in a liquidity pool changes relative to each other. This can lead to a situation where liquidity providers end up with a lower value of assets than they initially deposited, despite earning fees from the pool. It is termed "impermanent" because the loss is only realized when the assets are withdrawn from the pool; however, it can become permanent if the price does not return to its original level. This issue has been a major deterrent for potential liquidity providers, as it introduces a level of risk that is not present when simply holding the assets.
The SMARDEX protocol solution
| Ticker | SDEX |
| Category | Decentralized Exchange (DEX) |
| Website | https://smardex.io/ |
| @SmarDex | |
| Contract Addresses | |
|---|---|
| ethereum | 0x5d...ef Copied! |
| binance-smart-chain | 0xfd...0fCopied! |
| base | 0xfd...3fCopied! |
| arbitrum-one | 0xab...74Copied! |
| polygon-pos | 0x68...a6Copied! |
| solana | 9d...2jCopied! |
The SMARDEX protocol offers a novel approach to address the issue of impermanent loss. According to the scientific paper published on the topic, the protocol introduces innovative mechanisms that can mitigate or even eliminate impermanent loss for liquidity providers.
The paper presents a novel technology that employs formulas to manage liquidity differently through the concept of Fictive Reserve (FR)[1]. It notes that previous attempts to use FR have been made but failed to address the issue of impermanent loss (IL) and, in some cases, even exacerbated it. The scientific article provides an in-depth explanation of a new Decentralized Exchange protocol implemented on SMARDEX.
SDEX token and its role
SDEX is the native cryptocurrency token of the SMARDEX platform. It plays a crucial role in the ecosystem, serving as a medium for transactions within the DEX and offering various utilities to its holders. The token is designed to align with the platform's goal of reducing impermanent loss, providing an added layer of incentive for users to engage with the platform. Through the use of SDEX, liquidity providers can participate in the protocol's innovative mechanisms, potentially reaping the benefits of reduced risk in their DeFi activities.