TVL can balloon from nothing to $1 billion literally over night. Scaling up the network is not the hard part of building a DeFi protocol. The hard part is developing an incomparable technology that adds value in a way no other protocol can.
Shell has a lot of promise, but is still young and raw. We are in the advanced stages of R&D. The goal is not to make Shell a top 5 DeFi protocol as soon as possible. The goal is to realize the technical potential of the core protocol and the social potential of the community as quickly as we can.
Once we have a deep community and an optimal core protocol, ascending to the upper echelons of DeFi will be the easy part.
The purpose of this blog post is to give the community visibility on plans to further augment the core protocol and also solicit feedback on how to proceed with liquidity mining rewards and governance.
Market making for stablecoins is not the only use case for Shell. However, it is an important niche. If we can configure our liquidity pool to be a better stablecoin AMM than the incumbent, we will be well positioned to dominate other use cases in the future.
There are two areas to focus on:
Shell’s AMM model has many degrees of freedom and is highly flexible in its behavior. We have yet to realize its full potential. We need to identify the parameter configuration that will be optimal for stablecoin market making. We want Shell pools to have the best swap rates for any given stablecoin pair, under any given market conditions.
We are building the modeling tools to help us better select parameters. We will share more information about this soon. The basic idea is to simulate the swap rates our pool would quote under different scenarios and compare those rates to a Curve pool of comparable size. What parameter configuration will allow Shell to field cheaper swaps than the competition?
Having the best pool model is different than having the best pools. We need to further streamline and operationalize the deployment of new pools and their integration into the broader protocol. There is no substitute for direct experience. Furthermore, we can test out new parameter configurations in real market conditions. We recently upgraded our front end to handle multiple pools. We will be launching new pools very soon, probably this week. Ultimately, third party developers need to be able to quickly configure, deploy and integrate Shell pools.
In the medium term, we are working on a substantial upgrade to the core protocol: Shell v1.1. We have learned a great deal over the past month since main net launch. We have identified straightforward improvements that can have a big impact without much added complexity. We will discuss v1.1 more in another post, but there are two features worth emphasizing for our current discussion.