Just like Bitcoin, DeFi’s ambition to build a fully decentralized global network is the fundamental source of its revolutionary characteristics-distrust and disintermediation. These two characteristics constitute the core value of DeFi and determine its long-term market growth. It’s easy to see why this happens:

  • On the one hand, the core model of any DeFi project must be zero-centric to deliver unlimited trust and show the value of a decentralized network that exceeds the market value of a single product or brand.
  • On the other hand, in order to compete with centralized products and retain their most critical capabilities, decentralized networks must also be disbanded.

Non-cooperative network is a natural and robust decentralized network model. Shield is building a derivatives trading network based on decentralized non-cooperative game theory, consisting of traders, dual liquidity pools, liquidators and brokers.

Shield decentralized network based on non-cooperative game

The non-cooperative game theory was first proposed by John Forbes Nash in 1950. It describes a multiplayer game system that is not limited to two people (ie zero-sum games), and it has reached “Nash After “equilibrium”, it is very stable. Before the birth of the blockchain, most governance systems in human society, including banks, exchanges, Internet professionals and social institutions, were based on zero-sum games. The zero-sum game system will pin its hopes on some centralized groups to retain organizational functions or provide commands to fight decay.

However, the zero-sum game-based governance system is an unstable structure that moves to the left or right as the power of all parties in the game changes. This structure determines the convergence of power to the strongest from the very beginning. One aspect of the game leads to collapse and rebuilding of order over and over again. The Shield protocol is such a non-cooperative gaming network, as shown in the figure below:

Shield’s decentralized network is maintained by four key elements: broker, private pool LP, public pool LP and liquidator. The transmission is performed through the management token SLD.

Broker (responsible for the introduction of transactions): Divided into 4 levels, through competition to introduce traders to the network to earn commissions, different levels of commission rates. C-level and D-level will draw 10% and 20% commission rates from the reward pool, respectively. Every 30 days, 60% and 40% of the reward pool will be divided equally between A and B brokers, and the ranking will be reset according to the latest ranking.

Private Pool LP (Order Seller): Provide an address for a private pool, and each private pool competes with each other to provide liquidity (compete to become an option seller) to earn capital fees and accept SLD rewards for order liquidity.

Public pool LP (spare pool): A unified large liquidity pool that provides guaranteed liquidity through competition to obtain liquidity mining rewards.

Liquidators (provide liquidation): Compete to perform network liquidation tasks and obtain liquidation rewards.

Each aspect of the network has a clear interest incentive mechanism and a sufficient competition mechanism, so they all implement the needs of the network for their own interests. Therefore, they reach the best Nash balance of the entire network to maintain the decentralized security and stability of the network.

In-depth study of tokens to obtain long-term value

The key to a decentralized and stable network is to provide sufficient and reasonable incentives to each participant who maintains the network through the value carrier of tokens.

Shield designed the following mining incentives for public pool limited partners, private pool limited partners and liquidators who maintain the network:

  • Reserve liquidity mining: Each block that provides liquidity to the public pool will receive a “liquidity share * 32” reward in the SLD.
  • Order liquidity mining: Liquidity from private pools or public pools will receive an SLD reward of “Order Funding Fee * 30%/0.05” when accepting orders.
  • Liquidation mining: The liquidator will receive ” Gas fee for ether system* 150%/0.05“(In the case of insufficient system funds) and SLD rewards for the liquidation contest.

Every remaining 20% ​​of the mining share will receive half of the mining rewards.

Shield generates the repurchase price by keeping 10% of the SLD in circulation always equal to 100% of the value of the repurchase pool (derived from 90% of the transaction fee), while the mined SLD is redeemed through swaps and burning contracts (such as As shown above).

When the SLD’s secondary market price is higher than the current swap price, the value of the “swap sum” pool will continue to rise because no one will swap.

When the secondary market price falls below the current swap price, anyone can buy SLD on the secondary market to make the difference from this swap trading pool, thereby ensuring the lowest price in the secondary market (the lowest price is similar Based on inventory price). Valuation by PE valuation).

As the business model develops, transaction fees in the “swaps and losses” pool on the left will increase, while the SLD pool on the right will decrease due to burns and mining rewards halved. Therefore, in the long run, the value of SLD will continue to rise.

in conclusion

Shield is the first decentralized derivative network to adopt non-cooperative game theory. Every participant who maintains the network will be fully motivated. The redemption of tokens is done through an innovative “exchange and burn” model. Under the logic of unlimited business growth, that is, the value of swaps and swaps has unlimited growth, and the value of the pass used to redeem the value continues to depreciate, because they are destroyed and half of the mining, Shield’s native token SLD Value has long-term value potential.


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