Divergence between $SHD and $SILK Stakeholders

Shade Protocol
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The date is December 2025, and $SILK is the largest decentralised stablecoin in the cryptocurrency space.

It seems like a long way away, but there are many things we need to consider on the road ahead so that we reach our target.

One of the big expectations I have is that from the launch of $SILK at some point in 2022 till that date in the future, there will be a larger and larger deviation between the $SHD community and the $SILK community. At the launch of $SILK, both communities will be largely identical. Over time, there will be more and more people using $SILK that have no interest in $SHD, just the beauty of $SILK which is a privacy-preserving stablecoin that is tied to a basket of currencies and commodities.

This creates a potential conflict where $SHD governance rules over $SILK, i.e. a principal-agent problem. This could see $SHD holders vote to transition $SILK from its existing basket to 100% BTC because the modern world as we know it is close to dystopia. This might sound appealing to $SHD holders but to $SILK holders, this has entirely changed what the $SILK they own is expected to be stable against.

In this regard, I introduce a forum post which was discussed on the Lido forum. They have a similar relationship between $LDO and $stETH where the primary product of the Protocol is $stETH ($SILK in our case) but is governed by $LDO ($SHD in our case) holders.

The aim here is to provide $SILK holders with a window where they can veto governance proposals that impact $SILK. This will be slightly more complex on Shade Protocol because there are a number of primitives which have parameters that can be changed without any bearing on $SILK.

While $SILK is codified to remain stable, the governance layer of $SHD can change what “stable” means. This proposed addition would provide a layer of resiliency to $SILK that allows $SILK holders to be confident that there will be no drastic changes that will require them to have to react immediately.

By no means would I class this as an immediate priority. However, I think creating this conversation and gaining consensus on views will allow some clearer direction for one specific primitive - in this case, ShadeGovernance.

Please feel free to fire any questions or thoughts at me!

6 Likes
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Im sure allowing silk holders the ability to veto changes that affect silk will grow confidence in the project. I think you nailed it.

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“This could see $SHD holders vote to transition $SILK from its existing basket to 100% BTC because the modern world as we know it is close to dystopia.”

During the death spiral of Luna, I wondered why Do Kwon did not let it die and then airdrop the BTC vault to Luna holders based on a pre-collapse balance snapshot. He practically gave away all that BTC “value” to the arbitragers.

Seems a bit offtopic what I am mentioning here, but my point is that it would be really good to have a contingency plan in case the “stability” of $SILK were to face a mathematically inevitable/irreparable prognosis caused by a “shadow swan” event. Call it the “nuke keys”… would it be in the hands of whom?

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I dont know if this is needed because Silk is overcollateralized by decentralized borrowers. The backing of Silk, and these loans, should make or break the peg on its own.

I personally dont want to see the entirity of Shade and its Protocol Owned Value going to support Silk at all costs. In the edge case of Silk collapse Im not even sure Silk should have claims to the value of Shade holders. Id like to see a very clear distinction between Shade and Silk. Shade should agree to buy SILK up to the point where its created it. Beyond that it can support Silk by owning LPs with SILK:USDC or other stables to increase utility. Im not sure how much beyond that.