TM Rating: 75% |
Review Date: January 26th, 2022
Shade Protocol is an array of distributed and interconnected privacy-preserving DeFi products that leverage the full capabilities of Secret Contracts on Secret Network. One of the primary value capture mechanics for Shade within this suite of DeFi applications is a result of consistent burn mechanisms that help increase the scarcity of Shade and by extension its value.
Silk is the ﬁrst application of Shade Protocol. Silk is Secret Network’s native privacy-preserving stablecoin that will undergird all the other Shade Protocol applications that are created. We can compare Silk and Shade tokens in the way they work to how UST and Luna function in their own ecosystem with a dual burn minting process, adding privacy to the mix.
Synthesis, a privacy-preserving decentralized asset management protocol, is another solution of the suite being built by Shade Protocol. It aims to create a balance sheet of crypto-assets controlled by Shade governance which can be used for buy-backs, hedged positions, leveraged positions, collateralization, liquidity provision, batched Shade burns, user incentivization, and dividend generation. These crypto-assets are added to the Synthesis balance sheet via a “synthesize” mechanic introduced into all the Shade Protocol.
MEV (Miner Extractable Value) bots have decimated every day users on various swap dApps. Publicly visible collateralized positions have elicited larger market makers to advantageously leverage price movements to cause mass liquidation events. Front-running of NFT marketplaces have damaged the reputation of multiple platforms. Lack of transactional privacy have doxed various DeFi entities and have caused asset transfers to be monitored closely. Shade Protocol aims to ﬁx this and fully leverage secret contracts enabled by the architecture of Secret Network.
Secret Network is a layer 1 solution built with the Cosmos SDK, leveraging proof-of-stake (PoS) consensus using Tendermint’s Byzantine fault-tolerant algorithms. Secret Contracts on Secret Network achieve data privacy for Shade Protocol using on-chain encrypted data with Trusted Execution Environments (TEEs). Privacy has been the most obvious missing piece of DeFi. Traditional ﬁnancial markets offer a degree of privacy for users, and as a result offer up greater protections in some capacity than existing DeFi markets. Shade Protocol aims to be one of the ﬁrst truly decentralized and privacy preserving ﬁnancial applications, ushering in Web3 as originally envisioned by Secret Network.