Rowan Zwiers
We’ve found a very clear and easily digestible explanation of Sigmadex’s unique constant function market maker algorithm — utilizing an order book where all liquidity is pooled into one to solve the problem of having an asset market with changeable liquidity pools consisting of many limit orders which would leave too much discretion in the determination of the liquidity parameter.

Could you walk us through the development and thought process behind this model?

Peter Danihel
The thought here has been to simplify things. Managing an on-chain order book isn’t a very efficient way of doing things.

Instead what we have proposed here is measuring liquidity from several sources in order to regulate the amount of liquidity available to each individual asset.

This is actually even better for security and makes it tougher for market manipulators.

Rowan Zwiers
This approach seemingly comes with its own challenges — notably with regards to non-optimal arbitrage and front running. Proposed solutions are minimum orders and gas fee restrictions.

Could you elaborate on the specifics and considerations made with regard to participant accessibility (small orders) and trading experience (speed/gas restrictions)?

Peter Danihel
Front running can be solved with gas fee restrictions and shouldn’t be a problem on Polkadot. Since DOT doesn’t require an insane amount of computational power, the fees will be much less than traditional PoW consensus.

We will continue to experiment with small orders and what limits to place. It’s tough to say at the moment because we do not want to place limitations on order sizes if we don’t have to. Since Polkadot’s network fees are very small in size we can foresee people using DEXs more than CEXs in the future.

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Source: https://medium.com/hillrise-research/ama-highlights-sigmadex-24dd05c1d884?source=rss——-8—————–cryptocurrency