Very recently, we had a fun and exciting ‘Chill with Shield’ AMA session with the Core Contributor of Shield, and here is everything we discovered.
Firstly, Shield is one of the first 2FA on the Blockchain to incorporate Binance SmartChain for 2FA secret backup, replacing various centralized servers such as Amazon Web Services, Google Cloud, Microsoft Azure, and others. But apart from that, what sets it apart?
What sets Shield apart from others
Unlike the traditional nonlinear pricing model used by others, Shield applies linear approximation by cutting up the nonlinear process, thereby allowing decentralized risk-free perpetual to work well on the Ethereum blockchain with on-chain settlement. From the fundamental product perspective, risk-free perpetual is an exotic option from the traditional finance industry; and the core members of Shield bring this option on-chain and allow the users to strike without an expiration date.
Therefore, the traders of risk-free perpetual contracts do not suffer any loss from the unfavored price movement but only need to pay for the funding fee when opening the position. They also have the option to add funds into the funding fee account to ensure the balance payable. The margin is charged in the form of a funding fee and on Shield, the funding fee varies on a daily basis. In a nutshell, risk-free mostly refers to 0 position loss, which is the most significant loss on a centralized exchange. Shield aims to satisfy this risk management demand by offering risk-free perpetual.
Why Shield perpetuals are great
While standard perpetuals often experience position loss, their funding rates are also quite high. But with Shield perpetuals, users have to pay very little amounts to win big without any chances of position loss. The protocol allows users to open short or long positions with a prepaid funding fee in a fully trustless way. The maximum loss will be capped by the prepaid funding fee, and the gain stands to have infinite potential. And after the clearing process, the profits can be easily claimed back to the wallets. This is exactly why Shield perpetuals are effective and liquidity enhancing as well.
The Shield ITO is set to launch on 7 June 2021 at 11:00 (UTC+0) and will end at 12:00 (UTC+0), on 8 June 2021. It will be posted at the beginning of each round of the ITO and can be directly swapped on the Twitter page itself. Shield will be governed by DAO in the near future and the community will play a major role in governance and in reshaping the future derivatives protocol. In an attempt to fully distribute SLD tokens to the target users, Shield has chosen to launch their ITO by Mask permissionless tool.
Benefits of the ITO
The primary reason why Shield chose to start with ITOs is that they believe they can improve traffic and attract more loyal users by initiating the public sale on Twitter. Not only are ITOs a great way to let more people know and contact about their project, but it is also the easiest way for users to participate in such projects.
Shield wants to give back to its incredible community for their trust and support right from the beginning, and they plan to do this through the Shield Go Round (also known as a whitelist) they have launched specially for the Shield community. Those users who pass KYC can swap $SLD/0.045 $USDT. Shield will also create the liquidity pools on Uniswap after the ITO so that $SLD will not be short on liquidity.
SLD is the native token of Shield. There are mainly 2 use cases for SLD.
Shield is community-oriented and is therefore governed by DAO. Shield will gradually transit to community governance and reshape the infrastructure of future derivatives.
The mechanism is that 10% of the total SLD would always be equal to 100% of the Swap&Burn value, thus generating a repurchase price. Anyone can go Swap&Burn to earn profits.
Shield trade characteristics
The main features of trading with Shield are zero position loss, no expiry rates, and dual liquidity pools. Not only are these the biggest highlights of trading with Shield, but these are also the pain point of many decentralized exchanges.
- 0 Position Loss
Risk-free Perpetual Contract is an innovative financial product with infinite upside potential and limited downside risk, which has no delivery. The perpetual contract without potential position loss helps to avoid huge downside risks and even liquidation caused by price delays. The Shield protocol protects its users from all of this by allowing users to open short or long positions with prepaid funding fees in a fully trustless way. As a result, the maximum loss will be capped by the prepaid funding fee, while the gain will have infinite potential.
- Dual Liquidity Pools
Dual Liquidity pools by well-hedged private pools and retail-focused public pools to ensure strong liquidity for traders. In this way, the users on Shield will be able to customize their risk management when involved with liquidity mining. Traders don’t have to pay for the position loss, thus improving capital efficiency and profits opportunity. Private pools aim for institutional market makers and professional traders and take over the majority of risk on the system. Hence, the individual in a public pool can be protected and LP mining is relatively low.
- No expiration rate
The no expiration rate risk-free perpetual contracts of Shield are quite similar to perpetual contracts on centralized exchanges like Binance, Bitmax, etc. Users can exercise these anytime so it’ll be very flexible.
Shield Marketing Strategies
Shield has an effective go-to-market strategy that will get users and liquidity as well. The key features of their marketing strategy include
Risk-free perpetuals not only significantly decrease retail traders without potential downside risks on-chain, but they also satisfy the non-custodial, permissionless, and auditable features of decentralized derivatives in the DeFi boom. This unique selling point will attract end users in crypto and help them stay addicted to Shield once they try.
- Decentralized brokerage system and global KOL strategy
Shield is the first DEX to implement a brokerage system in a fully trustless environment. Brokers can earn up to 40%-100% commission rate on Shield, which is way higher than what is offered by CEX and they are also allowed to claim and check the rewards anytime. Shield will also capture new users with their global KOL strategy and connections. They have already partnered with global KOLs and trader communities, including Russia, Turkey, Thailand, Indonesia, Japan, etc.
- Sales team
Shield team has rich experience in running centralized crypto exchanges and Shield has also been working on a sales team to keep educating the new users under a mature user acquisition strategy.
Although Shield faced several challenges in solving random order matching on blockchain for private pools, they were able to successfully overcome this. Their contract engineer implemented an on-chain random algorithm to successfully process order matching to ensure fairness for the private pool and hence solved the issue. Shield also provides liquidity mining incentives for both LP1 and LP2. And they’re also the first DeFi project to involve the first decentralized brokerage system with global KOL to get more users.
Shield 2.0 and the future
Shield 2.0 is a decentralized derivatives protocol that is soon set to be launched. To safeguard the operation of risk-free perpetual contracts in a decentralized way, there is a need for decentralized derivative protocols that consist of traders, dual-liquidity pools, external liquidators and brokers.
In this new network, orders will be distributed to a public pool or a private pool, and once the margin of a trader or liquidity provider reaches the liquidation line, the third-party liquidators will step in and execute the liquidation. The decentralized brokerage system of Shield 2.0 will also encourage brokers to educate and provide consulting services for the traders they serve. The entire network also provides incentives for liquidity providers and liquidators through its governance token SLD, thus achieving an optimal Nash equilibrium of the network with a fully non-cooperative game to maintain security and stability.
Having held various community bounty activities and airdrop activities in communities around the world, Shield aims to continue this in the future also. Their code has been audited by SlowMist and Peckshield and they will also create liquidity pools on Uniswap after their ITO is closed. To learn more about Shield, check them out below.