Based on the concept that shells are the oldest form of money, the new protocol of the same name has been launched today, Oct. 6, offering its first stablecoin liquidity pool.
Stablecoins have exploded in terms of usage and popularity in 2020, and their total market capitalization now exceeds $20 billion. Using stablecoins for liquidity mining may alleviate some of the volatility associated with regular crypto assets such as Ethereum, but is Shell Protocol any different from the rest?
We are now LIVE! Shell is a liquidity pool protocol optimized for stablecoins.https://t.co/aWYdhB52pv
— Shell Protocol (@ShellProtocol) October 5, 2020
The Five Shells
The DeFi protocol aims to build upon five key features: deep stablecoin liquidity, reserve weights, peg loss protection, dynamic fees, and interoperability with other pool tokens. The aim is to offer a mashup of Curve, Balancer, mStable, and Mooniswap.
Our vision is to use stablecoins as building blocks to create an internet monetary system: a borderless, programmable medium of exchange accessible to all.
The first pool will be composed of four stablecoins weighted as follows: 30% DAI, 30% USDC, 30% USDT, and 10% SUSD. This balance provides a safeguard should one of the stablecoins lose its dollar peg.
It will have a dynamic fee system, which increases when a stablecoin deviates from its peg, designed to redistribute profits from arbitrage traders to liquidity providers.
As reported by BeInCrypto, arbitrage bots have been discovered devaluing tokens on protocols such as Uniswap.
At the time of launch, there are no SHELL liquidity mining incentives or governance tokens, and the platform appears to be offering just a single pool generating a share of the fees to yield farmers. It did add that issuance and governance are currently being developed, so a token launch is expected soon.
A Crowded DeFi Room
Shell Protocol is entering a very crowded DeFi space, especially where stablecoins are concerned. mStable is a protocol offering the ability to mint new DeFi assets pegged to stablecoins that are provided as liquidity.
In late September, the Origin Protocol launched OUSD, a stablecoin that can earn a yield just by sitting in a wallet. This was also a feature of Dai with the Dai Savings Rate, however, it has earned 0% for over six months now.
Pickle Finance is another stablecoin-oriented protocol recently launched to use vaults, or jars as it called them, in order to bring the four largest stablecoins closer to their pegs through liquidity provision.
Shell Protocol may have to offer a little more than just a share of the trading fees if it wants to compete for liquidity in this already crowded room.