# Examples

## SigmaRSV (Reservecoin) Simplified#

- SigmaRSV is a call option on a % of the ERG held in the reserve portion of the SigmaUSD contract
- Fees are continually added to the ERG held in reserve as users interact with the contract. This mechanism ensures liquidity and offers a mechanism of return beyond trading. SigmaRSV represents a price/book (P/B Ratio) on the ERG held in reserve.

It is important to understand three mechanisms that influence the outcome of each user of SigmaRSV

- Fees accumulate as users interact with the contract. Nothing is Free.
- The amount of ERG held in reserve floats (up/down) as users interact with the contract.
- The price ERG/USD floats (up/down) as users trade ERG.

### Overview#

- Imagine the Reserve amount is 100 ERG.
- Alice holds SigmaRSV, which represents 10% of the (P/B Ratio) contained in the reserves.
- Alice's SigmaRSV position is a call option on 10 ERG (minus the exchange fee)
- Let's imagine the price of ERG is 2$.
- Alice's SigmaRSV represents 20$ in ERG (minus the exchange fee)

**THE BALANCE IN RESERVE CAN GO UP**

- Imagine, based on use, the reserve now holds 114 ERG.
- Alice has SigmaRSV, which represents 10% of the (P/B Ratio) contained in the reserves.
- Alice's SigmaRSV represents a call option on 11.4 ERGs.
- Let's imagine the price of ERG is still 2$.
- Alice has 22.80$ in ERG (minus the exchange fee)

**THE BALANCE IN RESERVE CAN GO DOWN**

- Imagine, based on use, the reserve now holds 90 ERG.
- Alice has SigmaRSV, which represents 10% of the (P/B Ratio) contained in the reserves.
- Alice's SigmaRSV represents a call option on 9 ERGs.
- Let's imagine the price of ERG is still 2$.
- Alice has 18.00$ in ERG (minus the exchange fee)

**THE VALUE, ERG/USD, CAN GO UP**

- Imagine, based on use, the reserve now holds 114 ERG.
- Alice has SigmaRSV, which represents 10% of the (P/B Ratio) contained in the reserves.
- Alice's SigmaRSV represents a call option on 11.4 ERGs.
- Let's imagine the price of ERG is still NOW 3$.
- Alice has a call option 34.20$ in ERG (minus the exchange fee)

**THE VALUE, ERG/USD, CAN GO DOWN**

- Imagine, based on use, the reserve now holds 114 ERG.
- Alice has SigmaRSV, which represents 10% of the (P/B Ratio) contained in the reserves.
- Alice's SigmaRSV represents a call option on 11.4 ERGs.
- Let's imagine the price of ERG is still NOW 1$.
- Alice has a call option 11.40$ in ERG (minus the exchange fee)

## SigmaUSD (Stablecoin) Simplified#

SigmaUSD represents a call option on the dollar value of ERG held in reserve.

SigmaUSD uses Ergo's oracle pools infrastructure to calculate and adjust the current ERG/USD exchange rate. Reserve always backs sigma USD. The price ERG/USD floats (up/down) as users trade ERG.

**BASIC OVERVIEW**

- Bobs has 20 SigmaUSD, representing a 20 USD value in ERG.
- These ERGs are held in Reserve.
- This 20$ value is backed by reserves of at least
- (4x1)(80$ of ERG)(40 ERG @ $2)
- Bob at 2$ Bob can Redeem his 20 SigmaUSD for 10 ERG (minus the exchange fee)

**ERG/USD VALUE DROPS**

- Let us imagine the price of ERG drops from $2 to $1.
- Bobs 20$ of value is backed by at least
- (4x1)(80$ of ERG)(80 ERG @ $1)
- Bob can call 20 ERG (minus the exchange fee)

**ERG/USD VALUE INCREASES**

- Let us imagine the price of ERG increases from $2 to $4.
- Bob's $20 value is backed by at least
- (4x1)(80$ of ERG)(20 ERG @ $4)
- Bob can call 5 ERG (minus the exchange fee)

### Longterm framework of SigmaUSD.#

- SigmaUSD is an essential building block for a functioning DeFi System.
- The focus for ERG now shifts to building on the foundation it has set.
- Gateways, Dex's, Liquidity Pools, LETS systems. It is time to build use and utility.
- The importance and significance of stable value cannot be overstated.
- This is critical to the long-term prosperity of the Ergo Network and is important to understand.