SigmaUSD offers a unique way for miners to create the base infrastructure for a robust DEFI system.
Miners that maintain the network are the lifeblood of a robust POW system. A decentralised system will have a variety of actors that allow the system to grow. Considering the proper incentives to serve the community's needs is essential. Ergo is built on solid technological foundations; the decentralised financial market is made with historical foundations in mind.
Traditionally central banks held gold as reserves that backed currency. The currency was used as a stable medium of exchange throughout economies. When stable or backed by assets, this banking system allowed commerce and growth.
We have moved away from a system in which currency is backed by anything. The global reserve currency is run on a banking system with 0% reserve requirements.
Governments around the world are in the process of continually feeding liquidity into the global economy. Central banks globally are creating money and debt at unprecedented rates. This debt will burden countless future generations, or debts will reach a default and restructuring point.
Digital Assets are a market alternative to the inflationary pressure of fiat currency. The "law" enshrined in the code creates scarcity at a predictable emission schedule. The resource in Ergo is ERG, and miners consume electricity and create this secure electronic asset.
In the global economy, gold is produced by miners and sold to various actors. Some gold miners may sell ore/refined products to open markets, create OTC contracts, or sell to the central bank to hold in reserve.
Ergo already has pathways to the open market via exchanges. OTC, dark pools and a DEX are developing for private P2P sales. SigmaUSD represents a 3rd option that allows miners access to liquidity, the ability to interact with a central contract or bank while circumventing the open market.
The economics of mining crypto is similar to the economics of trading. Some miners build long positions. They are project-oriented and find a project they believe in and provide critical network infrastructure, maintenance, and development.
Other miners act as freelancers; they provide critical services to profitable projects. They often do not build reserves and continually liquidate in the open market to cover their production cost.
- SigmaRSV can offer project-oriented miners a way to maximise their positions by accumulating fees. This class of miners can naturally benefit from SigmaRSV.
- SigmaUSD can offer freelance miners liquidity to cover their expenses in a decentralised manner, free of exchanges. This class of miners can naturally benefit from SigmaUSD.
- SigmaUSD offers a somewhat hidden incentive for miners to create greater price stability in the asset they are assisting in creating and maintaining. Over time this builds to the robustness and resiliency of the network.
- PoW benefits from price stability. The core infrastructure providers (miners) operate on a Return on Energy Invested model. The base cost of this mode is Equipment and Energy.
- Price stability assists miners in predicting future costs/revenues. SigmaUSD can serve as a price stabilisation mechanism as miners interact with the contract based on their incentive. Long vs Liquidity.
- Interacting with this protocol rather than interacting with the open market is beneficial to all parties. ERGO's premise has always been a PoW system that can operate as a Digital Reserve of Programmable Gold