## Autonomous Fiscal Policy

### Supply Inflation

Sigmadex proposes inflationary rewards to be distributed to liquidity providers who lock their liquidity for a set amount of days. This parameter will become available when the network rewards pool is completely distributed.

Variables to be set by the community prior to genesis:

var description type
contractMaxLen Max duration of a liquidity contract uint8
minLiquidityStake Minimum amount of initial liquidity uint8
interestMultiplier Interest multiplier relative to timelock unit8
inflate Enables or disables inflation of total supply bool

### Supply Reduction

We use a deflationary mechanism to balance the inflationary rewards system. Any request for removing liquidity before its contract maturity will result in a penalty deflating the total supply of the tokens based on the remaining days and size of liquidity contribution.

Example:

1. Maria adds liquidity to a pool by staking Sigmadex native tokens and DOT.
2. She decides to lock her capital in for a period of 365 days.
3. 90 days down the line she decides to end her stake early and calls the withdraw function pre-maturely on the smart contract.
4. Her contribution is penalized using the formula below.

$$-f = p(1 + r)^{nt}$$

5. She receives the penalized amount back in her wallet.

The remaining of the penalized funds are proportioned the following way:

• Burned from existence (SDEX).
• Distributed into an impermanent loss insurance pool.
• Distributed into a future reward pool.

Reward pool tokens are awarded to users who call the withdraw function after their contract expires as a bonus for completing a liquidity cycle based on their stake.

### Network Bootstrap Rewards

To incentive liquidity mining and staking in the network at early stages, a certain amount of the initial token supply will be awarded to platform users who provide liquidity for tokens. This multiplier reduces as time furthers on and is directly correlated to the length of staked liquidity.