Introduction
In this proposal Shade Protocol outlines a strategy to expand NTRN liquidity to Secret Network & SHD liquidity to Astroport via protocol liquidity matching. We believe that private DeFi has massive potential, and a variety of traders would benefit from gaining access to acquiring NTRN liquidity on Secret Network. Additionally, we would advocate for this same deal structure to perpetuate SHD liquidity onto Astroport.
In terms of Cosmos Hub Alignment, $ATOM holders were airdropped SHD from 2022 - 2023.
Finally, I want to mention that Shade Protocol has strong interest in cross-deploying a transparent version of Shade Protocol to Neutron - we view team work surrounding liquidity as a potential signal towards an eventual potential cross-deployment in 2024.
About Shade Protocol
Shade Protocol has existed as a brand since 2021, with multiple product launches in the last two years. We believe private DeFi that is front-running resistant and metadata protective is the future of DeFi.
App: Shade App
TVL: $21M
dApps: Stablecoin, DEX, staking derivatives, bonds, & bridging. Money market + perpetual swaps incoming.
Monthly Active Users: 3k - 4k users
SHD ticker volume: ~$150k to $200k per day
SILK (stablecoin) ticker volume: ~$350k - $500k per day
The Problem
In this draft proposal, I wanted to carve out some time to talk about expanding NTRN liquidity & accessibility in a way that does not involve any of the following:
- An OTC
- Emissions to open market participants
Protocol swaps / OTC deals carry a unique risk as you are trusting the other protocol to not sell your token. Additionally, because you are swapping tokens you’re essentially short your own protocol token. Liquidity emissions on the other hand are tough because tokens are given to 3rd party mercenary liquidity providers that are not as long term aligned as the underlying protocols themselves.
The Proposal
I would propose the following alternative structure that involves both protocols working together to create deep liquidity without incentivizing 3rd parties & without swapping tokens with each other:
- Neutron brings $100k worth of NTRN to ShadeSwap
- Neutron brings $100k worth of NTRN to Astroport
- Shade brings $100k worth of SHD to ShadeSwap
- Shade brings $100k worth of SHD to Astroport
- $200k of value is merged into a SHD/NTRN LP token on Astroport
- $200k of value is merged into a SHD/NTRN LP token on ShadeSwap
There is now $400k worth of liquidity available for traders to interact with across two venues.
Key points:
The Neutron community would own ONLY the NTRN portion of the liquidity token.
The Shade community would own ONLY the SHD portion of the liquidity token.
If either community would like to withdraw their portion of the liquidity token, they would give the other community a 30 days heads up after which their portion of the LP token is returned to them.
Advantages:
- Improved NTRN liquidity / accessibility
- No emissions to 3rd party LPs
- No speculative risk of owning a 3rd party’s token
- No speculative risk of trusting a 3rd party to own a significant portion of your protocol’s token
- The protocols are the only liquidity providers
- Can withdraw at will
Risks:
- Impermanence Loss, but only for the single sided portion of liquidity provided.
This is an interesting dynamic. If NTRN decreases in value against SHD, NTRN will have access to more NTRN tokens if they decide to exit the liquidity match deal. If NTRN increases in value against SHD then the Neutron has effectively tapped into the liquidity of SHD and appreciated in value which is a collective net win for Neutron.
ShadeSwap is an excellent venue for NTRN as we are massive supporters of ATOM liquidity:
- Largest stATOM backed decentralized stablecoin (SILK)
- ~$4,000,000 in ATOM+ stATOM liquidity across ShadeLend + ShadeSwap
We believe the trading community on Secret Network would massively benefit from being able to acquire NTRN on the DEX. Additionally, with our Secret Ethereum campaign there is a variety of ETH users privacy sensitive users that will gain exposure to the NTRN token.
Custody
In order for Neutron as a partner to feel as secure of possible, we would entrust the custody of the LP tokens on both DEXs to Neutron to signal our trust. If the Neutron community would prefer ShadeDAO to custody the LP token we would be happy to support that as well.
Would love to get your feedback on this type of structure, as I truly do believe this is the most protocol aligned risk-averse approach to expanding liquidity.
-Carter Woetzel (Shade Protocol Lead Researcher)