Building a fully decentralized global network (like Bitcoin) is the fundamental source of DeFi’s revolutionary qualities of borderless trust and disintermediation. It is these two qualities that build the core value of the DeFi project and determine its long-term market capitalization boundary.
On one hand, the core business aspects of the DeFi project must be 0-centric in order to carry unlimited trust, making the value of the decentralized network beyond the market value of a product or brand.
On the other hand, the decentralized network must also be disintermediated in order to compete with centralized products and retain the most critical core competencies.
Shield is one such decentralized non-cooperative game derivatives trading network consisting of traders, liquidity pools, clearers and brokers.
Shield decentralized network based on non-cooperative game
First proposed by John Forbes Nash in 1950, non-cooperative games describe a multi-player game system that is not limited to two people (i.e., a zero-sum game) and that is stable after achieving a Nash equilibrium.
Before the birth of blockchain, most of the governance systems of human society, including the familiar banks, exchanges, Internet majors, and social institutions, were based on zero-sum games. Zero-sum game systems pinned their hopes on leaving organizational functions, or providing order to combat entropy growth, to a few centralized strongmen. But as we will see later, a governance system based on zero-sum games is an unstable structure that moves to the left or to the right as the power of the game parties changes, a structure that from day one determines the convergence of power to the strongest side of the game leading to the collapse and reconstruction of order over and over again. The Shield protocol is such a non-cooperative game network, which is the fundamental mathematical basis for blockchain to reshape the world order.
Shield’s decentralized network is maintained by four roles: broker, private pool LP, public pool LP, and clearer, and dispatches value through the governing pass SLD.
Brokers (bringing in trades): There are 4 levels, which compete to bring in traders to the network to earn commissions, with different rebate rates for different levels, C and D levels will contribute 10% and 20% of the commission to the reward pool respectively. Every 30 days, 60% and 40% of the bonus pool will be divided equally between the A and B ranked brokers, and the ranking will be reset based on the latest ranking.
Private Pool LP (Offer to Sell): One private pool for one address, with each private pool competing with each other to provide liquidity (competing to be a seller of options) to earn position fees and SLD rewards for order taking liquidity.
Public pool LP (provides inferior security): a unified large liquidity pool that competes to provide guaranteed liquidity to earn liquidity mining revenue.
Liquidators (provide clearing): Compete to perform network clearing tasks and earn clearing rewards. Weekly ranking based on clearing volume, the top three will be rewarded with an SLD clearing competition in addition to the clearing reward.
The decentralized network built by Shield has clear incentives and sufficient competition mechanism for each role, each person performs the needs of the network for their own benefit, but achieves the optimal Nash equilibrium for the whole network to maintain the security and stability of the network.
Long-term value-oriented pass-through model
Shield has designed the following mining incentives for the public pool LPs, private pool LPs and liquidators who maintain the network.
Reserve liquidity mining: each block providing liquidity to the public pool will be rewarded with a “liquidity share *32” SLD.
Order taking liquidity mining: liquidity from either the private or public pools will be rewarded with an SLD of “lots of positions taken *30%/0.05” upon order taking.
Liquidation mining: liquidators will receive the SLD liquidation compensation reward of “Liquidation with Ether system Gas fee *150%/0.05” (in case of insufficient system fund) and the liquidation competition SLD reward.
The above mining rewards will be halved for every 20% of the remaining mining share mined.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/understanding-defi-derivatives-protocol-shield-governance-and-token-mechanisms-from-non-cooperative-games/
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