Shell Protocol – a stablecoin AMM – has launched its first pool on mainnet.
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We are now LIVE! Shell is a liquidity pool protocol optimized for stablecoins.https://t.co/aWYdhB52pv
— Shell Protocol (@ShellProtocol) October 5, 2020
Featuring a target weight of 30% DAI, 30% USDC, 30% USDT and 10% sUSD, Shell’s first pool makeup mirrors Curve’s sUSD pool, the same pool used by Swerve Finance with slightly different weighting.
Shell pools have five features worth emphasizing:
- Deep stablecoin liquidity
- Reserve weights
- Protections against a broken peg
- Dynamic fees
- Interoperability with aTokens and cTokens
Shell pools have minimum and maximum allocations for each stablecoin. For example, the pool must always have between 3% and 57% of a given stablecoin to ensure that if a reserve permanently loses its peg, liquidity providers won’t lose all of their capital.
In addition to charging a fixed fee on every swap, Shell pools charge a dynamic fee that increases in proportion with the pool’s slippage. The more a stablecoin deviates from its peg, the higher the fee assessed by the pool. Dynamic fees redistribute profits from the arbitrage traders to the liquidity providers. Not only can Shell facilitate trades between stablecoins, it can also facilitate direct trades between Aave and Compound and their interest-earning wrappers.
Shell has flexible bonding curves, the parameters of which can be changed post-launch dynamically. This allows Shell pools to adapt to new use cases and market conditions. Subsequent iterations of Shell will add even more flexibility.
Shell has undergone two separate audits from Consensys Diligence and ABDK. Currently, there is no active liquidity mining program for their SHELL tokens. The token issuance is currently being designed, and more information will soon be shared, the team has stated.
Kain Warwick, the founder of Synthetix, showcased his support as Synthetix’s sUSD is a part of Shell’s maiden pool.
Great to see sUSD included in the first @ShellProtocol pool! https://t.co/R0aaOD4XzP
— kain.eth (@kaiynne) October 6, 2020
Currently, the only dApp browser support is MetaMask with plans to integrate WalletConnect SoonTM.
A Tough Shell to Crack
Shell Protocol will face tough competition from other stablecoin AMMs such as Curve, mStable, and DeFiDollar. While all of these protocols are unique in nature, the overarching theme of reducing stablecoin volatility serves as a good step for DeFi as a whole. The bigger question now becomes which stablecoin AMM garners the most traction, and whether or not governance tokens of these protocols can find attractive valuations as APYs settle back down to their standard rates of ~10% APY.
While yield chasers are remiss, the excistence of APYs up to 10x higher than traditional savings accounts points to a long-tail of stablecoin lending in DeFi, a trend that Shell will look to capitalize on in the coming months.
To stay up with Shell, follow them on Twitter.
Tarang discovered ETH in 2018 and has been actively involved in DeFi after finding PoolTogether in 2019. He’s most interested in the DEX sector as a frequent user and participant in Uniswap and Kyber Network alongside lending protocols like Aave. Tarang’s active presence in DeFi has given him a front-row seat to cutting edge trends and real-time developments. Stay up with Tarang by following him on Twitter.
