As decentralized finance grows further in the speed of light, new projects seem to appear from nothing. Following all the novelties rising amid the scene can be quite hard, especially if they involve somewhat complex structures and scarce public relations policy. That is the case with Shell Protocol.
Meant to be a decentralized exchange (DEX) working similarly to Curve Finance, a lot of facts regarding the project are still unclear, including their trademark (we do not know if it is Shell Protocol, Shell Exchange, or Cowri, exactly).
The Way People Deal with Cash
The name of the project comes from Cowrie or Cowry, little shells that were used throughout human history for several purposes, such as jewelry, rituals, and gambling. But these shells were especially famous as they were used by many ancient civilizations such as China, Mesopotamia, India, and East Africa as a representation of value, like a primitive sort of cash.
These cowrie shells were used by merchants and traders to do business, just like we use credit cards or banking deposits nowadays.
Of course, time passed by, and today a new financial era is ahead of us, sparkled in 2009 by Satoshi’s whitepaper.
That is why the team behind the project chose the name carefully, as the idea has as its’ critical conceptual building block the existence of “shells,” which are pools to store value in the form of different tokens.
How Does It Work?
The Shell Protocol (or Cowri) is a decentralized exchange, designed specially to facilitate low slippage stable coin swaps.
The protocol is a network made up of these stable coin baskets so-called shells. This shell network works as a DEX to pool liquidity for P2P steady coin trades, so customers who hold SHELL tokens earn passive income from liquidity fees.
As we all know, the idea behind a stable coin is to minimize price volatility, usually pegging this whether to a cryptocurrency, fiat money, or even commodities like gold. USDC is a stable coin pegged to the U.S dollar, for example, in a 1:1 ratio.
Slippage can be explained as the difference between a specific price at which an investor made the trade with the actual cost of the asset. Volatility-prone trading markets like cryptocurrency exchanges are often affected by its’ effects, especially when markets are bearish or moving too fast.
Low slippage helps to improve market efficiency and precision when traders are doing business, so the main goal here is to decrease slippage as much as possible to benefit both traders and liquidity providers.
Speaking of liquidity, anyone can become a liquidity provider for the protocol. It only requires depositing a stable coin in one of Shell’s liquidity pools, where each time a new deposit arrives, the contract automatically mints a fungible token (SHELL) to represent the user’s share among the total pool.
The platform runs a unique structure that uses an Automated Market Maker system, enabling users to trade trustless through a liquidity pool.
Although the platform was made available on the main net in early 2020, most users still clueless about it (despite some attention from analysts, forecasters, and crypto specialists).
It is known for working similarly to Curve Finance, having the same minimalistic approach to layouts, with a simple interface filled by data and numbers.
For novice crypto traders, it surely will be less attractive (or not appealing at all), but it seems that a user-friendly experience it’s not what in the platform’s plan since the beginning.
More experienced users can benefit significantly from it, as an inter-stable coin trade with less slippage can improve profits, with no concerns about how to deal with the platform structure.
Also, the Shell protocol’s liquidity pool has a built-in safety system in case a stable coin loses its peg. Unlike other platforms pools, where all assets could be just drained, leaving liquidity providers crying rivers behind, the Shell/Cowri pool did not let liquidity providers lose all their money (although they still lose some, unfortunately).
The project is backed by a team with a strong background in software engineering and economics.
As the famous poet William Congreve once said, “uncertainty and expectation are the joys of life”. Despite giving us a clue of their idea and goals, the project still sounding more as a sort of enigma than an actual and functional DEX.
Some people would say that it pretends to mimic the Curve Protocol, offering similar services with just some different features, also focusing on an over minimalistic approach.
Despite this, we still have to give it a chance, as we know, stable coins are the backbone of decentralized finance and promise to be the next step to revolutionize the global financial system.
With a bit of improvement here and there, especially public relations, user experience, and fee policy (which is still somewhat unclear and open to flaws), the protocol can become more accessible, thus benefiting more people.