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Shade Protocol — Bonds Audit Complete

By |2022-11-16T16:35:26+00:00November 15, 2022|Tags: , |

Greetings community,

Shade Protocol development has continued to progress rapidly with core contracts set to be launched on Secret Network mainnet in fall of 2022. Prior to the launch of the mainnet contracts, Shade Protocol will be releasing Shade Bonds — a privacy-preserving DeFi instrument where users can purchase digital assets from the ShadeDAO by depositing protocol desired cryptocurrencies into a smart contract.

In this blog post, we will describe the rationale behind changes in Silk’s stability model in lieu of certain algorithmic stablecoins breaking, and what you can expect moving forward from Shade Protocol.

Basics

Before challenging these carry-over assumptions from the Terra model, we must first backtrack to core finance concepts: assets & liabilities.

Within the context of stablecoins, every single stablecoin is a liability (promise of $1 worth of redemption). In order to issue a liability, there must be assets backing the system to properly account for redemption of liabilities at large. A simple ratio encapsulates this stability:

Assets / Liabilities = Degree Of Stability

The assets within the Terra model backing the 18B $UST was the collective market capitalization of Luna (used to handle redemptions from UST to Luna), ~$1.5B worth of Bitcoin held in reserve, as well as the depth of DEX liquidity available for the sale (redemption) from 1 UST to $1 worth of assets other than Luna.

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