My Thought behind SheepDex: Design the Product Well, and Success will Follow

By the Founder of SheepDex

We have become accustomed to traditional finance where power and funds are controlled by large institutions for too long. We have no say in the matter, just like the one-quarter of people in the world who have no access to banking services or formal financial services. The 1.7 billion people who do not have a bank account may never be in the eyes of those arrogant and superior financial institutions.

Fortunately, we have blockchain and DeFi.

The emergence of DeFi has completely changed the rules of the game in the financial world. It represents a fully transparent financial movement without border or censorship. It has no discrimination against anyone and provide a fair chance for everyone. Those without a bank account, as long as they have a mobile phone, now can participate in one of the most advanced financial activities in the world.

This is subversive, and it has also made DeFi’s explosive and rapid development inevitable.

DeFi will redefine the future. Facing DeFi, we are with awe. It is exciting to be a part of this wave. It has stimulated our creativity, and we also hope to further promote the development of DeFi.

I am firmly optimistic about DEX

November 2018 witnessed the launch of Uniswap, which has become a phenomenal project that changed the industry forever by its AMM mechanism. So far, DEX is undoubtedly the most important infrastructure of the DeFi world, and it has also ushered in exponential growth. According to DeBank, the total trading volume of DEX in the past 24 hours has hovered around 4.44 billion USD.

Any behavior related to assets will eventually returns to trading. Therefor, I believe that trading will always be one of the most important track of DeFi. The AMM model is a huge innovation and breakthrough, which shows the world another way of trading. No KYC, no censorship, anyone could easily trade assets on DEX. Besides, DEX also makes it simple and convenient for exotic assets to be tradable，stepping on the threshold of the long and costly process of getting listed on a CEX.

I see DeFi as the future, and DEX represents the direction of advanced productivity and there’s no doubt about its bright prospects. This is also why we, the SheepDex team, choose to focus on this direction.

However, we also noticed that there are many limitations with the current DEX, such as the low capital efficiency, and the separation between spot trading and derivatives trading.

To solve these, SheepDex is trying to bring you the most comprehensive and smooth trading experience in DeFi by working on a DEX that integrates both V3 AMM for spot trading and derivative trading. Through our team’s rich financial background and deep technology experience, we will redefine your experience with DEX.

SheepDex will be the Binance in DeFi. I’m confident about this.

Well designed product logic paves the way to success

According to our roadmap, we will first launch the spot trading. SheepDex adopts the most advanced V3 AMM mechanism, which has improvements including concentrated liquidity, range orders, multiple fee tiers and advanced oracles. Simply put, now it’s easier for LPs and traders to earn more incomes on SheepDex. To further learn about the V3 AMM functions and how to get the most benefits, please refer to this article A Deep Dive into SheepDex’s V3 AMM .

Today I will mainly share with you the logic behind SheepDex’s product design.

In the world of DEX, liquidity is as precious as oil. To achieve sustainable development, it’s important to ensure liquidity and realize the product’s own empowerment.

How will SheepDex achieve this?

First, SheepDex has introduced a diversified incentive system with triple incentives available at the same time: yield farming, LP rewards and transaction rewards. For the transaction fees, 50% will be used for market value management, such as repurchase and burn the platform token SPC, which will empower the value of the entire ecology.

Another 50% of the transaction fees will be given to LPs as LP rewards, which will make LPs profitable. With yield farming also available, these incentives will attract more LPs to provide liquidity on SheepDex, leading to a larger TVL and better liquidity.

Second, DEX with better liquidity will attract more traders as their transactions will have lower slippages. concentrated liquidity of SheepDex’s V3 AMM makes it possible to achieve better depth with lower slippages in the range where most transactions are happened compared with other DEX. In addition, SheepDex also provides additional transaction rewards to attract traders, so transaction volume will be further boosted.

Third, larger transaction volume in turn will increase the return of transaction fees as LP rewards, making SheepDex attractive for more LPs. This will further increase TVL and form a virtuous cycle of “Income -TVL- Transaction volume — Increased income”;

Last but not least, as there are three pools with different fee tiers, a token in the platform may have different prices, so there is an opportunity for arbitrage and may attract professional arbitrage teams. This will also increase the transaction volume.

The below chart of SheepDex’s logic behind the product is more intuitive and clear. Every step is related and empowers each other. In this way, SheepDex has achieved its own business model, and makes the sustainable development possible.

Now as you can see, SheepDex is the product with great potential and radiates strong vitality. We also welcome more professional market makers to join us, to be part of this great journey, and to earn the most profits.

SheepDex’s next step — derivatives

When investors are dissatisfied with only spot trading, and want to pursue higher investment returns, they will turn to derivatives. This is the inevitable development path.

In any mature financial market, the transaction scale of derivatives must be much larger than spot transactions. However, the situation is just the opposite in DeFi, which means the derivative industry is still immature and full of possibilities.

V3 AMM is only our first step. After this, we will be devoted to the development of derivative trading. As I said before, our goal is to provide you the most comprehensive trading experience in DeFi. This couldn’t be achieved without the derivative part.

A little bit of spoiler of SheepDex’s perpetual contract function here.

SheepDex will make it more cost-effective for you to hold your contracts for a long time, as SheepDex offers zero funding rate of perpetual contracts trading through the vAMM mechanism. It also has a price rebase mechanism, which will provide arbitrage opportunities and ensures that the price will not deviate too much from the spot price.

This is quite exciting and attractive, isn’t it? Just stay with SheepDex, and we will have more surprises for you.

The value and meaning of DeFi is to explore a whole new economic structure and redefine the current rules. It is a long and difficult road, and there is no shortcut. We are grateful to the pioneers who were brave enough for their step-by-step exploration, and we also look forward to our own effort to continuously expand the border of possibilities. I hope that SheepDex could not only be a product that satisfied our trading needs, but also be a product that leads DEX to maturity and a new stage.

This is the best of time. Let’s wait and see what happens next.