Hello Everyone
Below I will be presenting what I would consider my thoughts are on many of the discussions i have seen around shade, and particularly focus on how i think cryptocurrency is a new asset class and what that implies for growing shade. I want to provoke thought, challenge some ideas and hopefully learn from responses that others post.
I will state as a disclaimer, my thoughts on these matters are still what I would consider “in transit” and have shifted in recent months due in no small part to more experience, watching and interacting with crypto markets during this last bull and recent upturn, and several community members who I think have voiced good opinions consistently that have been positively contrarian at times. (shoutout MT for being my Greek muse of crypto).
Shade Protocol was and is designed to create a DEFI suite that adheres to very simple rules
- No new Dapp tokens for Core Primitives
- Utilization of Secret Network to provide confidentiality for its users transactions, while allowing them to decrypt them (This is a fundamental piece of what I personally believe crypto in general needs, as do many of us)
- The growth and management of SILK, an encrypted stablecoin not pegged to the dollar (something I also believe is a primary necessity for crypto to make sense for greater usage and meaningful decentralization.)
There are others to list but these are what I consider to be core to the Protocol and its mandates.
With crypto being a newer industry I think that many people walk in with many experiences and assumptions pulled from other asset classes, equities/commodities/currencies/ect . I know I have them. I see these in nearly all the discussions people have when talking about crypto.
All this to say, i think that crypto currencies have elements of a new asset class, whilst still maintaining combinations of other asset classes, depending on what it is meant to do. (this is very arguable and please do so)
Bitcoin - I view bitcoin as a commodity, not dissimilar to gold. It is hyper liquid, distributed, and demanded for a variety of reasons (1st mover/decentralization/battle tested/cult of personality around the founder/many locations of utility, etc). But it also has elements of currency’s, used as payments and exchange/storage of value and of this new asset class.
Uniswap - I view uniswap as having elements of a equity, as it is providing very particular services, which demand fees, and then these are either captured back to a protocol treasury, or distributed to LPs. It also has aspects of this newer crypto class in many ways.
Why do these things matter in my mind
Because crypto and blockchain have changed things
Fiat currency’s have been used and were created because trying to move/trade/manage commodities and goods was not liquid enough. It was expensive to hold and exchange. Now with cryptocurrency’s you can exchange a good/service(commodity) in extremely liquid manners. Yet the cryptos with an aspect of fiat currency’s (usdt/dai/silk) are even better than real world ones as they can create new pegs, have decentralized ownership (no central treasury for some), are hyper efficient for settlement, and can be truly self custodied amongst many other things.
Equities are used to have formalized governance and incentive structures for those who hold that equity in order to have common enterprise with the goal of making a profit. Now cryptocurrencies that have very different designated goals than making a profit can have the same level of control and common enterprise through governance and a shared treasury.
Commodities were desired as they are used in production/for services/goods/ect as well as having some general demand that goes beyond its usage (scarcity/trust/etc … Gold comes to mind). Now with crypto a token with properties of commodities can retain an immediate global presence and extreme liquidity.
tldr: blockchain/cryptos make old assets classes better when they can translate to being on chain
The New Asset Class
This is probably the most experimental piece of what I am writing. I would ask others to challenge/form this paradigm as a whole, and weigh in on this with articles/research/and personal experiences/thoughts.
I think that cryptocurrencies encapsulate the below attributes, garnering a new asset class.
- Decentralization is desired (in no other class do i think this is generally desired)
- Trustless systems (all other systems require 3rd parties for verfication/storage/aquiring/ect and a trust in a third party to make it work.)
- Self Sovereignty (unless you have gold buried on land that you dont think anyone knows about, you are not self sovereign in your choice of how to hold the value that you work for and produce, and in what way.)
- Open sourced (shared knowledge open for reuse allowing it to constantly evolve and get better)
I am sure I am missing a few. Please correct me and comment your own.
This is to say, to try to treat crypto as a normal asset class alone is a mistake, and is missing many keys aspects of what it means to be a part of this new class, while retaining aspects of others. This is how I think about regulators trying to approach cryptos. Imagine when planes first began to be manufactured they tried to regulate them like cars because they had wheels, or like boats because it can go over oceans. You’re technically right, but are missing so so much. You also miss the nuance of each project and the goals of that currency with what it is trying to do. People do the same thing with trying to start new cryptos, treating them like old asset classes only. Driving a plane on a road works, yeah, but you know that thing can fly right?
Alot of words. What does this mean for Shade.
We need to treat Shade like a cryptocurrency, that has aspects of an equity(governance and central treasury) a commodity (an asset that is representative of some larger thing or has some ingrained utilties) and this new crypto class as a whole. Many times in the whitepaper and in other discussions it is argued to treat the system similar to a balance sheet. I disagree on this in some regards, although this mindset can be valuable in some ways at particular moments. I think that treating it like this will severely limit its growth capabilities and the aspects of cryptocurrency classification that make it special. This paradigm would argue we should reduce emissions as much as possible in favor of profitability for this decentralized treasury.
- This is in direct conflict with decentralizing the protocol through emissions
- This severely limits the growth potential of the protocol. Shade is a microcap, to start taking “revenue or profits” back to the treasury is counter growth. Even in the world of equities, taking on revenue or profits in the beginning is nearly the antithesis of what it takes to grow the whole venture. I would challenge our thinking around this and real yield as a concept as a whole. I think that much much later in life cycle this model may be great. But as of now I am very uncertain.
- This greatly limits Shade liquidity at a time where it is sorely needed
A few of the ideas in my mind to help shade decentralize and grow to new users (please share your own)
- Airdrop a portion of the clawed back old airdrop to Silk/dshd pool once its live (similar to stride airdrop with daily snapshots). airdrops are amazing growth levers for visibility and awareness, decentralizes the tokens and helps it become much more liquid. this would also get usage and liquidity on the protocol
- Put staking yield tokenomics portion back on and allow the protocol to collect all fees so it can use them for (bootstrapping new pools and products as they launch with liquidity, spending for protocol expenses, potentially for emitting multiple assets towards LP’ers (imagine one could earn bitcoin as well when Lping on the swap. that is a compelling story imo)).
- Otherwise If we are to keep the real yield model, we should not cap the staking yield. The narrative around this could be a potential growth lever (as we have seen) to address to users. Im for either keeping it or removing entirely, doing in the middles is optimizing a system for longevity, not growth, when it is still in its infancy, and this I think will harm Shades growth this next Bull cycle.
- A refocus on the narrative of Shade and what it does for users and protocols. I am not a marketer/growth guy in general, but I think alot of time and effort needs to be put around how we communicate what we are to gain interest in the project, and we arent there yet.
All this to say, I am incredibly excited for what everyone is doing with Shade Protocol. I see a bright future for Shade and I want us moving forward holding many of the same assumptions and goals for the system as a whole. I have helped contribute to Shade since its inception, and I plan on continuing until 1. I am incapacitated 2. I am no longer needed 3. The chain stopped producing blocks forever
Please do not stop talking to one another and coming up with ideas and best practices
I think we have an amazing protocol that is growing and get better every day. With each launch and each update we get closer to fulfilling the vision laid out in the whitepaper.
A list of thoughts/ideas/and truths that I want to share that didnt fit well into the above as I typed this up this afternoon.
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Fundamentals does not mean you will be big. Fundamentals are needed for longevity of the system, but the amount of projects we have seen that have great tech and people, but died or stay small because no one knows about it are near infinite. A large amount of the top projects are shitcoins that do nothing. We can do better than them, but more product/fundamentals will do little to greatly grow without truly leveraging aspects of the new asset class. Fundamentals will prove the project out and make sure it survives as there is actual utility to it. Not make it explode.
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Narrative. Narrative. Narrative.
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If its not focused on being a decentral and distributed system, whats the point.
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Liquidity is God in the world of Finance
