Frequently Asked Questions

What Is Sikka?

Sikka is a secure and reliable protocol solution for stable asset SIKKA. Users can borrow SIKKA, using liquid staking tokens as collateral. Users can also supply pairs of assets to liquidity provider to yield-farm and earn rewards. The basic purpose of the protocol is to provide competitive yield in a sustainable way, enabling the majority of users to profit from the increased money velocity of crypto markets.

What Is Stable Asset SIKKA?

SIKKA is the stable asset minted by the Sikka. SIKKA is always pegged to 1 dollar USD and its circulation is backed by over collateralized assets.

How Does SIKKA Compare to Different Stable Assets?

Sikka is an overcollateralized, decentralised, permissionless protocol which uses high multiple digital yields. The yield sustainability of algorithmic stable coins is low whereas Sikka is as good as a fiat-backed stable coin.

It has been proven that over-collateralized stable assets are the most sustainable. Until Sikka and SIKKA stable asset, there were no DeFi stable assets that were inclusive to users within the entire spectrum of capital power. Its non-algorithmic architecture protects peg and enables staking rewards and composability with other PoS protocols adding utility to SIKKA and Sikka as well as other DeFi protocols with low risk and sustainable yields.

How Will You Ensure Liquidity?

Sikka Protocol faces two main liquidity challenges:

  1. Maintaining SIKKA stable asset liquidity.
  2. Maintaining MATIC Liquid Staking liquidity

Maintaining liquidity for both tokens is important to keep the peg of SIKKA stable asset to USD and the MATIC Liquid Staking peg to MATIC token.

To ensure SIKKA liquidity, most of Sikka Revenue Pool will be composed of Sikka's borrowing interest collected from SIKKA borrowers. MATIC staking rewards from MATIC collateral will be redistributed to SIKKA liquidity providers, and in a second phase to SIKKA stakers. One of the main benefits of SIKKA is the ability to earn Sikka staking rewards from Sikka Revenue Pool, whereas the buying pressure will require a sufficient amount of liquidity to avoid SIKKA trading at a premium for a prolonged period of time.

To ensure MATIC collateral liquidation and collateral withdrawal, users will face an unbonding time of 3-4 days similar to MATIC liquid staking, or receive a MATIC Liquid Staking token immediately after the withdrawal and rely on MATIC liquid staking liquidity.

With MATIC liquid staking the unbonding period is 3-4 days, and the peg is expected to remain strong due to market makers' willingness to get MATIC liquid staking tokens at a discount and cash out their profits after the unbonding period. To contribute to maintaining the MATIC liquid staking liquidity, the Sikka team will upgrade cerosRouter to allow for deposited MATIC staking into MATIC Liquid Staking (e.g. 80% MATIC Liquid Staking / 20% MATIC). This will permit MATIC collateral withdrawals or liquidation in MATIC tokens. It might reduce the amount of revenues in Sikka Revenue Pool, but it expect to benefit the protocol in the long run by significantly increasing MATIC liquidity.

How Can I Earn Money on Sikka?

There are different ways to generate revenue using Sikka:

  • Deposit MATIC and borrow SIKKA, then deposit SIKKA into a liquidity pool to earn from its transaction fees.
  • Farm the LP token received for depositing SIKKA into a liquidity pool.

Where Does the Sikka Yield Farming Reward Come From?

Sikka accumulates yield from 3 primary sources: borrow interest, liquid staking rewards, and swap fees from deposits into liquidity pools on DEXs. This combination maximizes potential yields because it covers various use case scenarios. Interest and swap fees will be driven by protocol usage as well as the supply and demand balance. At the same time, Proof-of-Sstake Liquid staking rewards will be generated as a result of the economic activity on-chain. Such diversified activity ensures that network validators staking native tokens keep on generating yield as more transactions occur.

This sustainable yield generation mechanism creates a dynamic where Sikka produces stable and consistent risk-adjusted returns. When the yield is transferred to the borrower, upon the collateralized MATIC, the yield risk/reward ratio improves further. This creates a flywheel effect, increasing the interest and swap fees generated by Sikka Protocol.

What Is Sikka Revenue Pool?

It is a pool that contains 2 types of income: liquid staking asset’s reward APY and Sikka borrow interest. Sikka Revenue Pool is distributed back to the liquidity pool to incentivize users to become a liquidity provider.

What Are Sikka's Borrowing Mechanics?

We are trying to achieve sustainable and competitive yield minimizing systemic risk by using:

  1. Yield-bearing stable asset.

  2. DeFi integrations to boost yield in a more sustainable way.

  3. User has the ability to add their own leverage.

  4. Integration with other lending platforms for leverage (collateralized VAI to borrow USDC).

  5. Making MATIC more scarce via liquid staking.

How Do the Liquidation Mechanisms Work on Sikka?

To ensure SIKKA remains fully backed by MATIC collateral, pools that fall under the minimum collateral ratio of 130% will be closed (liquidated) and have the debt paid back externally or redistributed.

The debt of the pool is canceled and absorbed by the Stability Pool and its collateral is distributed among Stability Providers.

The owner of the pool still keeps the full amount of SIKKA borrowed but loses part of its value overall hence it is critical to always keep the ratio above 130%, ideally above 150%.

Anyone can liquidate a pool as soon as it drops below the minimum collateral ratioMinimum Collateral Ratio of 130%.

What Are the Use-Cases of Your Two Native Tokens SIKKA and IKKA?

SIKKA is the USD-pegged stable asset used to pay out loans on Sikka Protocol. At any time it can be redeemed against the underlying MATIC collateral at face value.

IKKA is the secondary token issued by Sikka. It captures the fee revenue that is generated by the system and incentivizes early adopters and SIKKA holders. IKKA token is the Sikka Protocol's governance token, managing Sikka Revenue Pool distribution and IKKA token rewards.

IKKA will fulfill various functions:

  • IKKA can be used to boost SIKKA rewards for liquidity pool staking.
  • User can use IKKA to vote for governance proposals on Sikka.

Why Did You Choose This name? Is there any backup story?

The founding team is natively Indian, "sikka" in Hindi means "coin", and it is also an old significance with money. We wanted project to resemble our core values and heritage that's why we chose this name.

Do you have plans to expand and venture into other ecosystems such as Solana, BNB Chain, or Ethereum?

We are going to stick to only Polygon chain. But maybe, eventually, Ethereum networks like Arbitrum.

What Has the Sikka Team Achieved So Far And What Is the Near Future Plans?

We have already built the testnet and right now it’s live. Apart from that, we are collaborating very closely with partners to enable a Sikka sidechain where gas fees would be paid in SIKKA, enabling as such SIKKA stakers to earn additional layer of reward by delegate staking to Sikka sidechain’s validators.

What Is Sikka’s Plan to Gain Adoption of the SIKKA Stable Asset?

We are positioning Sikka as a widely utilized decentralized stable asset protocol and trusted reference rate enabler in the crypto market with a combination of unique features and by capitalizing on Proof-of-Stake incentives from liquid-staking assets.

Development and release of new features and functions will be carried out in phases to continue.

What's Sikka's Tokenomics?

We have attributed 55% of the token supply to borrower incentivization, 10% to sikka staking and LP rewards, 20% to community, 10% for the team, and 5% for marketing. We arrived at these metrics to sustainably run the network and provide incentives according to market situations.

Why Have You Chosen Stable Assets as the Crypto Lending Method for Sikka and What Benefits Will Polygon's Technology Provide?

Stable assets are the most money velocity product for any chain to drive the economy, here you mint the stable asset SIKKA by depositing MATIC tokens which are redeemable too and not stake fixed. It will help a lot for the Polygon ecosystem to bring the multiplier effect on TVL.