Thread by @DelucaDougie

1 - Recently I published a thread on @SecretNetwork - $SCRT & its bubbling ecosystem:

https://twitter.com/DelucaDougie/status/1475536132028960769?s=20

Before reading this thread on @Shade_Protocol - $SHD, I’d highly recommend familiarizing with SCRT as understanding this content is highly dependent upon that

@SecretNetwork @Shade_Protocol 2 - Shade Protocol is a stablecoin centric protocol native to SCRT. $SILK, $SDE’s counterpart, an algorithmic stablecoin, is privacy-preserving and inspired by $UST’s design with some variation. SDE, comparable to $LUNA, is the treasury, utility, arbitrage, and governance token.

@SecretNetwork @Shade_Protocol 3 - Though pre-launch, Shade has a robust roadmap which includes the SILK stablecoin, a native arbitrage mechanism, synthetics, a reserve, a leverage product, & liquidity provisions across the SCRT eco. Make sure to keep up to date via their socials & discord

@SecretNetwork @Shade_Protocol 4 - Critical to SHD’s value prop is SILK: a privacy-preserving stablecoin, it can be minted on Shade Protocol using Secret Tokens and Shade. Silk inherits the SNIP20 token standard, meaning all transactions with Silk are private. Now we’ll dive more into how this thing works:

@SecretNetwork @Shade_Protocol 5 - Silk is pegged to a basket of global currencies and commodities, creating a level of stability that could be unmatched. Here’s one of the earliest models of $SILK and the superiority of value capture in SILK vs USD.

@SecretNetwork @Shade_Protocol 6 - There are four minting options with Silk and Shade, DAO entry & conversion. The DAO entry of sSCRT for Silk or Shade is one directional. Burning Shade for Silk and vice versa is conversion. The conversion closely resembles how $UST & $LUNA interact. (see more below)

@SecretNetwork @Shade_Protocol 7 - Like with UST & LUNA, the conversion mechanism in tandem to exchange arbitrage is what helps maintain Silk’s peg during periods of supply and demand expansion and contraction. Expansion is when the value of SILK trades for above $1.00 while contraction is when it’s below.

@SecretNetwork @Shade_Protocol 8/ - For example - if SILK is at $1.02, a SHD holder is incentivized to burn $1 worth of SHD for $1.02 of SILK in return. Receiving a marginal return for this, this action increases the total supply of Silk in order to reduce the price of Silk to its intended target of $1.00

@SecretNetwork @Shade_Protocol 9 - Differing from $UST, Silk’s dual burn entry mechanism means $SHD and $SILK are backed by arbitrage and the DAO entry burned collateral value of sSCRT + other L1 / uncorrelated assets tokens. This allows users to directly transfer value into the Silk and Shade ecosystem

@SecretNetwork @Shade_Protocol 10 - Unique to the ShadeDAO entry is that multiple L1 tokens are able to utilize this entry. The ShadeDAO then stakes these L1 tokens, generating yield that is redirected to the treasury and to stakers. Imagine a DAO earning yield on securing multiple layer-1 protocols…

@SecretNetwork @Shade_Protocol 11 - As seen with @WhiteWhaleTerra, arbitrage is highly sought after and a critical component to algorithmic stablecoins. What differs w/ $SHD is that arbitrage is innate to the protocol while White Whale is not to $UST / $LUNA. For performance, I find this to be superior.

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 12 - That is to stay, SHD staking collateral + ShadeDAO collateral is deposited into an arb contract, passively earning revenue for SHD stakers and ShadeDAO. Also helping secure the Silk peg. This adds 2 additional stability mechanisms that other algo stablecoins don't have.

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 13 - While other protocols leave minting to validator inflation or collateralized leveraged positions, Silk’s mechanism creates a supply sink for SCRT by locking up/staking SCRT, creating value for Secret Network and SCRT holders by decreasing the total circulating supply of SCRT

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 14 - I find it important to include that due to $SCRT’s interoperability with $ATOM’s IBC, other tokens such as $sATOM could use the DAO entry and bonds of Shade Protocol. Yes that means we could even see $sLUNA, $sKDA, & among others!

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 15 - The reserve, where the deposited assets are held, is created from a controllable, dual-variable system. Variable 1, Burn, destroys a % of the deposited token. Variable 2, Synthesize, carries the unburned balance to the Treasury which is controlled by staked Shade governance

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 16 - These variables are, and will be continue to be, introduced into all of the Shade primitives, empowering governance to control how assets are maximally utilized within the respective applications in relation to the larger protocol

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 17 - Like with all $SCRT dapps, privacy is a key component of SILK as its core team envisions holders using it widely, like at Starbucks. Not revealing tx history, holdings, & other info enabled by competing stablecoins, SILK is well positioned for mass adoption

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 18 - As previously mentioned, the supply constraining capabilities in Shade’s reserve also makes $SHD appealing to developers & users as it creates advantageous investment opportunities. This can be utilized as a driver for adoption, like we’ve seen with $LUNA, but on a new level

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 19 - Its positioning in $SCRT creates bountiful opportunities in liquidity. For Secret and other Cosmos-chains to scale, stablecoin liquidity will be essential. Privacy will also be a critical for all chains. Not to mention how SILK - UST could combine like $MIM & $UST

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 20 - For all $SCRT users & investors, $SHD & $SILK are must-haves. I’d also recommend experimenting & researching them to any $UST or $ATOM eco users. The interconnectivity IBC enables + the privacy $SCRT / $SILK drive sets up the potential for significant mutual benefit

@SecretNetwork @Shade_Protocol @WhiteWhaleTerra 21 - Though $SILK is still unproven, being early to something with a value proposition so crucial to mass adoption is a major opportunity. Just like investing in $LUNA at $.50 was. Thank you @l_woetzel for your help in curating this thread!