Momentum - Major Shifting Of Protocol Levers & Pools

Greetings community,

In this post I’d like to outline some shifts I would propose in existing mechanisms to power the real yield model that Shade staking is heading towards:

  1. Add a 1% interest fee to the USDT vault
  2. Add a 1% interest fee to the USDC vault
  3. Increase ShadeDAO share of liquidations to 20%
  4. Increase taker fee on ShadeSwap to 100%
  5. Increase stkd-SCRT withdraw fee to 0.25% up from 0.05%
  6. Daily convert all accrued fees into SHD on ShadeSwap - send 100% of these rewards to SHD stakers
  7. Add in BCM which gives the ShadeDAO fees from trading and helps correct the SILK peg
  8. Modify stkd-SCRT delegation to shift 85% of the staked SCRT to Secure Secrets - one of the core contributors to Shade Protocol. This would help fund protocol development. 15% to IBC relayer validators & Shade contributors.

Currently, the composition of ShadeSwap Pools is the following:

  • 15.32% (StableSwap)
  • 15.30% (Derivative pools)
  • 51.07% (SILK/volatile pools)
  • 18.30% (SHD/volatile pools)

I would propose the following changes to ShadeSwap:

Removal of all SHD pairs tied to anything other than SILK.
Cut emissions across the board by ~30%.
Head towards programmatic assigning of rewards towards partners based on volume + external incentives.

  • 45% of all emissions to SILK/SHD (+ ~26.70% to SHD category)
  • 35% of all emissions to SILK/Volatile pools (- ~16%)
  • 10% of all emissions to StableSwap pools (- ~5.00%)
  • 10% of all emissions to derivative curve pools (- ~5.00%)

Advantages to this set-up:

  • Consolidate liquidity of SHD tied to just SILK instead of fracturing across multiple pairs.
  • Gives SHD liquidity holders an extremely valuable pool, serves as a DCA pool due to SILK pairing
  • Makes ShadeLend usage as a leverage long into SHD significantly easier because of better liquidity
  • Ties SHD to stablecoin liquidity as opposed to tying speculative value to volatile assets like ATOM
  • Less low risk stableswap farming of SHD
  • Less liquidity on deriv curve, but because its so efficient this is still fine

Disadvantages: SILK will lose some of its utility as there will be more shallow liquidity on SILK optionality. As a whole though, we should re-access which pools are an efficient spend in terms of volume and usage.

Let me know what y’all think about these ideas :slight_smile:


These all sound like intelligent maneuvers for right now. I’m supportive.

I did happen across some thoughts on #8 I think… there was a question about what this does to decentralization. I don’t necessarily share those concerns though. If memory serves, staked-SCRT is like 1% of supply of SCRT? If that’s true, we are talking about, essentially, a net zero impact on decentralization. If I have any of these facts wrong though feel free to correct.

what do you mean by “Increase taker fee on ShadeSwap to 100%”? do you mean increase them by 100% aka x2?

No strong feelings on most of these, increasing fees to be more in line with other protocols is nothing unexpected.

This however is a strong deviation from how stkd-SCRT has been pitched in the past, namely a ‘public good’ to not only benefit the product but also the community and well performing validators. Something that has been especially important for well performing lower ranked validators that typically have a significantly harder time to get delegations. It stings because stkd-SCRT has been welcomed with open arms by the wider Secret community since it’s inception, partly I’m confident because of that ‘public good’ ethos.

Forgetting all of the above, I still think it’s a bad plan to centralize the delegations as proposed in the opening post. By allocating 85% of the staked SCRT to one validator the risk profile changes considerably. Currently the highest allocation is at 10%, due to the nature of the contract this fluctuates but if I recall correctly it should trend towards that number with all other nodes trending towards 5%. If that node were to be jailed, or in the worst case be thombstoned, the negative effects are noticeable but minimal. In the centralized model proposed in this thread that would completely change and there is a lot larger risk of serious impact on the value of stkd-SCRT. There is a point to be made about the chances of jailing and/or thombstoning happening at all being lower in a centralized model, but for something that is this critical the impact of a worst case scenario should definitely be taken into account, after all anything can happen to even the best of node runners as we’ve seen in the past.

I understand where the desire to centralize comes from but I think it would be a major mistake and open the door for other LSDs to gain traction. Personally I would not be comfortable holding a LSD where one validator has more than 20, maximum 25, percent of the delegations.


I am not cofortable with delegating 85% of stkdsct to one validator. Shade Protocol has to be decentralised and follow that ethos, and other well performing small validators should also benifit, that will be preferred

I completely agree with the logic mentioned here 85% delegation of stkt scrt to one validator is not sounding nice, when we aim for a decentralised setup!! other small well performing validators should also be open to get rewarded well for work!!

totally disagree, if the other validators want some delegation they should acquire SHD. I would be in favor of some type of governance related validator allocation

Essentially, what we are proposing is that we convert the ShadeSwap model where all trading fees go to SHD stakers instead of liquidity providers. This means LPs are universally sharing fees across all pools, and are highly incentivized that emission allocations are maximizing fee accrual. Additionally, it means SHD LPs now tap into other revenue streams. You can think of this as maximally aligning liquidity providers with the protocol.