SHD <> XPRT $300k Protocol Liquidity Match ShadeSwap Proposal

Governance
1

Greetings Persistence community,

Today I wanted to carve out some time to talk about expanding XPRT 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 are essentially short your own protocol token. Liquidity emissions are tough because tokens are given to 3rd party mercenary liquidity providers that are not as long term aligned as two protocols collaborating / integrating.

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:

Persistence brings $150k worth of XPRT to ShadeSwap

Shade brings $150k worth of SHD to ShadeSwap

This $300k of value is merged into a SHD/XPRT LP token

There is now $300k worth of liquidity available for traders to interact with.

Key points:

The Persistence community would own ONLY the XPRT 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 XPRT 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 XPRT decreases in value against SHD, XPRT will have access to more XPRT tokens if they decide to exit the liquidity match deal. If XPRT increases in value against SHD then the Persistence protocol has tapped into the liquidity of SHD and appreciated in value which is a collective net win for Persistence.

ShadeSwap is an excellent venue for XPRT as we are supporters of Persistence staking derivatives:

  • stkATOM backed decentralized stablecoin with SILK
  • ~$100k in stkATOM + ATOM liquidity across ShadeLend + ShadeSwap
  • ~$24M in TVL https://defillama.com/protocol/shade-protocol
  • ~$100M+ of cumulative spot volume on ShadeSwap
  • Exposure to privacy focused traders

We believe the trading community on Secret Network would massively benefit from being able to acquire XPRT on the DEX since they are already familiar with the staking derivatives there. Additionally, with our money market primitive on the way we foresee there to be even further utility for stkATOM.

Existing Liquidity Partners

  • KUJI
  • MNTA
  • ANDR
  • FINA
  • STRD
  • LVN

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

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)

5 Likes
2

I think this is a great way to put the idle community pool funds to use. I also think this is strategically good for the Persistence Community as it strengthens the partnership with Shade Protocol.

Building liquidity for XPRT has so far been rather costly (through incentives). This proposal would essentially bypass the need for spending tokens to build initial liquidity in a new ecosystem (Secret Network) where XPRT currently has no liquidity.

5 Likes
3

Liked what I see here. Pooling $150k of XPRT and $150k of SHD into ShadeSwap by Persistence and Shade is a clever strategy.
It ensures both protocols can manage without external intervention, maintaining control on their own contributions.
Also feel this collaboration not only strengthens both communities but also improves trading opportunities. So, for me, it’s a clear win-win for everyone involved & a Yes for me

3 Likes
4

This proposal looks to be innovative and mutually beneficial for XPRT/SHD. Its great that there is emphasis on maintaining protocol alignment and risk aversion, especially the avoidance of third-party dependencies.

Overall, this seems like a forward-thinking strategy, I’m in favour of the prop :+1:

2 Likes
5

Wookie loves to see that two protocols are collaborating and getting aligned long term with this PoL integration.

2 Points that popped up while reading:

  1. What happens with the rewards resulting from that LP position - if its not incentivized at all there is no potential of future growth of that LP, in case there will be a APR next to the swap fees - it should be covered that it will be distributed evenly back to the LP or even “compounded” back into the LP.

  2. At this cooperations you always have to see who benefits the most and who “pays” for it. Comparing the Mcap while doing that makes also sense. In this case the common benefit is that the Liquidity of XPRT & Shade will be increased whereas → Mcap XPRT: $60M || Mcap Shade $11,4M → seems like Shade is benefiting more + this Liquidity is build on ShadeSwap. But the accessibility of XPRT is increased for the Shade ecosystem.

What would make sense is that DEXTER the Persistence DEX would also get some Liquidity for the DEX.

Nevertheless, these are just some thought that popped into Wookies head while reading that.
Wookie is in favor of cooperations - that’s the spirit of the COSMOS ecosystem.
Love to see it.

2 Likes
6

XPRT requires extra attention with bootstrapping liquidity since most of the XPRT (76%+) is staked. This proposal uses idle funds to boost XPRT’s liquidity with minimal cons.

The number of pros massively outweighs the cons in this case. Although, I would love to see these 2 questions clarified:

2 Likes
7

I agree in general with this proposal @Wookie bring to us very important points, i’m more leaned to the idea of compounded rewards in to LP and provide liquidity also in DEXTER. This is because in Dex TVL of SHADE is double than DEXTER but in terms of Mcap. XPRT is 6x the Mcap of SHADE, so in my opinion bring liquidity to DEXTER is necessary.
Compounded rewards back to LP in my opinion is the best solution, the idea is to grow liquidity and, and increase trading activity, also 30 days bond period makes distribution less atractive to both parts.
I like to hear some clarification about this points.

2 Likes
8

Firstly, kudos to both Persistence and Shade Protocol for exploring this collaborative liquidity initiative. It’s encouraging to see protocols aligning for long-term benefits.

I will also would like more clarification on what Wookie above had asked.

Moreover, in the spirit of maximizing benefits for both communities, are there any synergies or cross-promotional activities planned between the two protocols to further enhance the overall value proposition for users?

Overall, I’m optimistic about the collaboration and appreciate your efforts in expanding liquidity. Looking forward to your insights on these points.

1 Like
9

In the case of trading fees they go back to liquidity providers (0.29% to LPs, 0.01% to the fee collector) such that the LPs automatically accrue & grow over time as volume is accrued. Essentially, how much of the underlying pool the LP token has a claim on automatically grows overtime. That being said, we have a TraderJoe style liquidity orderbook on the way that will definitely attract efficient LPs to continue to grow pools aggressively as long as there is sufficient volume.

That’s a rather adversarial approach to thinking about these types of protocol partnerships. I prefer to think of this from a trade route theory perspective. By pairing with the SHD token, XPRT gains access to $10M of additional liquidity - improving its ability to function as quality collateral. Additionally, you gain access to a whole set of traders that will only trade with their privacy preserved. That’s an entirely unique customer set that is differentiated from other DEXs throughout Cosmos. You also have to consider the broader LST competition at play here, tighter integration with Shade Protocol on its DEX + stablecoin + incoming money market can accelerate Persistence adoption. If you only ever look inwards for growth you end up not tapping into the network effects of trading/collaborating with other adjacent ecosystems.

To your point though, we would be happy if DEXTER supported a SHD/XPRT pool, I think that makes total sense. The liquidity could be split $150k / $150k between the two trading venues. We appreciate the feedback!

1 Like
10 
  • Protocol Liquidity Matching on a SHD/XPRT pool (pending)

  • stkATOM for SILK minting (complete)

  • stkOSMO for SILK minting (pending)

  • stkATOM as accepted collateral on the Shade Money Market (imagine lending out stkATOM & passively earning both staking yield & lending fees!)

  • Integration of the pWallet into the Shade App (if possible) 

  • More intentional marketing surrounding Persistence products to improve volume profile (which will convert to better liquidity)

  • Supporting new Persistence assets on the Shade Bridge, empowering privacy for these assets

  • Co-marketing / events where it makes sense

Can see this covered in this thread here:

2 Likes
11

One quick thing to clarify here, ShadeSwap has instant unbonding on all LP positions. In this protocol liquidity deal, the LP position co-created would passively soak up trading fees & grow overtime (improving the trading experience / improving accessibility).

1 Like
12

We are very pleased to see that the two protocols are working and supporting each other.
We genuinely appreciate all the replies and new thoughts shared here.
Furthermore, we wholeheartedly advocate for the establishment of a SHD/XPRT Pool on DEXTER.
Cheers,
The Stakecito Team

5 Likes
13

Thank you for Carter for eloquently describing this proposed next step in our collaborative journey with Persistence.

I would like to also signal my support for this building further sustainable liquidity and alignment with Persistence. As Persistence has remained one of the leaders in the interoperable LSD space, Shade sees great value in building out mutual liquidity for SHD <> XPRT on ShadeSwap as well as work towards increasing the exposure and utilization of Persistence LSDs within the Shade private DeFi suite.

3 Likes
14

Greetings Persistence One community,

On January 30th 2024 we put up this initial forum post walking through the details of a potential protocol liquidity match between Shade Protocol & Persistence One Community to mutually improve the liquidity profiles & accessibility of both the SHD & XPRT tokens.

In the 13 days since the forum went live, the Persistence One community has been able to offer up excellent feedback on the proposal for the Shade team to incorporate into a new & improved proposal that will be going on-chain today. Additionally, we had the opportunity to talk about the proposal at length on the official Persistence YouTube channel.

Proposal
The ShadeDAO will loan 14,220 SHD (~$75k) tokens to the Persistence One Community (persistence1zlc6d8nr2uwqym32mk7pqv2k7qjkwlcm6vfh29) i.e. (Persistence Incentivization Multsig) which will be matched with a corresponding 177,138 XPRT (~$75k) to create $150k of SHD/XPRT liquidity on Dexter.

Additional context: the Persistence Incentivization Multisig has been spearheading XPRT Liquidity Bootstrapping since Persistence Proposal 21 and recently received 1M XPRT for Incentivization of Dexter Pools and XPRT Liquidity in Proposal 70.

The Persistence One Community will loan 177,138 XPRT (~$75k) tokens to the ShadeDAO (secret1dmya04qnutunactlc2mmlnjqnsm5rp7le8uks3) which will be matched with a corresponding 14,220 SHD (~$75k) tokens to create $150k of SHD/XPRT liquidity on ShadeSwap.

Values were derived using a 7 day TWAP as recommended by the Persistence One core contributors. The full data can be audited and viewed here:

A key component is that the Persistence One Community & ShadeDAO are empowered to take the necessary actions to create and bootstrap the liquidity pools as well as handle any potential future migrations of these funds.

As per the original forum post, in the event of either community wanting to wind down a pool a 30 day notice should be given to the other community. At which point, all XPRT would be returned to the Persistence community pool from the LP tokens on both venues, and all SHD would be returned to the ShadeDAO from the LP tokens on both venues.

Summary

A YES vote means you approve of a 354,275 XPRT community pool spend (~$150k) sent to persistence1zlc6d8nr2uwqym32mk7pqv2k7qjkwlcm6vfh29 (Persistence Incentivization Multsig) to be used for the creation of liquidity pools on both Dexter & ShadeSwap. A YES means you approve of the loan structure, as well as the use of the Persistence Incentivization Multisig to escrow and handle this liquidity deal.

A NO vote means you do not approve of a 354,275 XPRT community pool spend (~$150k) to be used for the creation of liquidity pools on both Dexter & ShadeSwap. A vote no means you do not approve of the loan structure, and do not approve of the use of the Persistence Incentivization multisig to escrow and handle this liquidity deal.

2 Likes
15

This proposal is on chain:

1 Like