Silk Invariant Research [Solving USD/SILK StableSwap Curve] #2
Description
Silk Invariant Research [Solving USD/SILK StableSwap Curve] - (TAKEN, open to additional team members)
One of the most unique innovations that has emerged within DEX design are StableSwap invariants - mathematical curves that differ from traditional constant price invariance curves. StableSwap invariants differ because of the design assumption that two assets will be trading at a similar price, or at least at a stable ratio between the two assets (USD stable / USD stable).
Due to the change in the invariance curve, fees and slippage are significantly reduced - creating a much better trading experience and liquidity providing configuration. StableSwap still inherits key attributes that are similar to other DEXs. Specifically, infinite liquidity with increasingly worse slippage the more volatility and derivation that occurs.
Problem
Silk faces a distinct mathematical headwind that needs to be solved for: the price of Silk is stable in relation to other stablecoin assets (such as the dollar), but with a degree of volatility due to the peg slowly shifting on a multi-year basis.
Assumption:
Assume that Silk starts at ~$1.05
Assume that Silk will change, at most, +/- ~$0.02 worth of volatility annually
Solution:
A middle-ground stablecoin invariant curve that is able to reflexively adjust to Silk’s slowly changing peg, while also operating with minimal fees and slippage due to the design assumption that the ratio between a USD stablecoin and Silk should be continually stable on a day-to-day basis (but not perfectly 1-to-1, and with variant over extended timeframes).
End Result:
A curve that can be used by any stablecoin DEX that wants to implement USDC/SILK, UST/SILK, USDT/SILK into a curve-like product. Because of the mass adoption of USD stablecoin pairs, it is unlikely that DEXs will perform this research on their own. As such, this grant is building for a future end state where we see a transition from USD centric stablecoins to alternative decentralised and non one-to-one sovereign currency pegged stablecoins. This research could hypothetically empower other non-USD but highly stable stablecoins. It is theorised by the designer of this grant that modifications to existing StableSwap invariant curves will not necessarily be that large, but potentially will have significant ramifications to the sustainability of such a product.
Stableswap Reference Research:
https://curve.fi/files/crypto-pools-paper.pdf
Curve StableSwap: A Comprehensive Mathematical Guide
StableSwap-paper
Understanding StableSwap Curve
Research value capture for Shade Protocol ecosystem
Number of users
Silk Adoption
Liquidity Adoption
UX on Silk acquisition
DEX adoption
Team members
Canaro86
Team's experience
PHD in Mathematics
Development Roadmap
The creation of the USD/SILK invarient is broken up into three milestones
Example milestones:
Preliminary Research (weeks 0 - 3)
Model Presentation / Simulation / Documentation (weeks 3 - 10)
Psuedo Code Implementation (weeks 10 - 13)
Completion of milestone one will result in 250 SHD. The completion of milestone two will result in 1.5k SHD. The completion of milestone three will result in 500 SHD. Total: 2,250 SHD.
At current market prices (~$50) this amounts to approximately $112,500 worth of SHD.