SigmaUSD on Ergo
Privacy, Stability and Governance
Stablecoin Update V2 Coming Soon
Ergo, the pioneer in extended UTXO blockchain technology is updating the AgeUSD protocol.
The newest version will have the capacity to allow the underlying parameters of the smart contract to be updated by members of the community.
Ergo is an amendable blockchain, this allows for protocols to be upgraded as new use frameworks are released.
AgeUSD is a crypto-backed algorithmic stablecoin protocol that has been created in joint partnership by the Ergo Foundation, EMURGO, and IOG on top of the Ergo Blockchain.
The Cardano blockchain is in the process converting AgeUSD to Plutus code, which will be implemented in their network in the future.
SigmaUSD On Ergo
AgeUSD’s economic model was designed in partnership between IOHK, Ergo, and Emurgo. It maintains the conservative settings for collateral reserves and avoids the need for liquidations. Along with that, it supports a fully decentralized stablecoin emission setup. Thus, SigmaUSD will offer the world a stable, simple, and decentralized stablecoin.
The SigmaUSD stablecoin development is a key underlying piece of infrastructure that will interact with ErgoSwap, the Ergo native decentralized exchange that is currently in development.
Unlike Ethereum-based crypto-backed stablecoins, such as DAI, Emurgo introduces a Staticoin protocol-inspired design that does not rely on CDPs (Collateralized Debt Positions). The reason for this is the vulnerability of CDP-based protocols in terms of high volatility and blockchain congestion. As Emurgo states, “Black Thursday,” when MakerDAO CDPs were triggered for liquidation due to volatility and then sold for $0 due to blockchain congestion that prevented others from bidding, demonstrated that a new design is needed. For SigmaUSD, this scenario is not possible.
SigmaUSD operates on larger margin requirements than traditional crypto-backed stablecoins. ERG will back-SigmaUSD in a floating reserve between 4x1 to 8x1.
The minimum threshold (4x1) protects SigmaUSD holders; tokens are ALWAYS backed by sufficient ERG for market volatility.
The maximum threshold (8x1) protects SigmaRSV holders from experiencing unnecessary dilution of their P/B position. This limits inflationary pressures on SigmaRSV holders.
The SigmaUSD has locking mechanisms to keep the Reserves within this range. It is possible that users can temporarily find themselves unable to interact with the contract. This is the alternative to forced liquidations.
The Federal Reserve Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.
The global reserve currency is backed by 0% reserve ratios.
A minimum 400% reserve ratio backs-SigmaUSD.
First Class Privacy Meets Stable Value
SigmaUSD will also have unique features that are unique to the privacy aspects of Ergo.
SigmaUSD will benefit from Ergo’s first class privacy features, including full integration with Ergo’s non-interactive mixer. Ergo’s non-interactive mixer, the ErgoMixer is the first non-interactive mixer built on an extended UTXO blockchain.
As SigmaUSD builds gateways and is adopted on exchanges this will give crypto users access to the ability to mix stable value.
The majority of mixers in the blockchain space have an element of time associated with mixing services. This time element opens users to potential losses, as the underlying value of the asset they are mixing may depreciate during the course of mixing.
SigmaUSD is the first blockchain project to implement the concept of stable mixable value.
This allows users who wish to use mixing services the ability to have predictable outcomes. The SigmaUSD model, mixing stable value with predictable returns allows future Dapps that implement smart contracts that use SigmaUSD to have greater levels of privacy and anonymity.
The SigmaUSD protocol will offer miners a pathway to stable value while circumventing exchanges. As gateways open and exchanges list SigmaUSD this is a viable path for miners to quickly cover the cost of their operations with minimal effect on market prices.