What is Silk?

What is Silk?

Silk is an overcollateralized and privacy-preserving stablecoin. Its value is pegged to a basket of assets and commodities. This feature, combined with its reflexive and adaptable nature create the potential for Silk to become the most stable asset on our planet.

Why not the dollar or USD stablecoins?

Pegging a stablecoin to a single currency gives the asset a single point of failure. That failure might be slow and creeping (like US dollar performance over time) or it could be catastrophic and unpredicted.

Suppose that the US dollar inflates 10% in one year. That means any USD pegged stablecoins you hold lost 10% of their purchasing power even though they are still priced at $1.00. Of course, this is also true for any dollar pegged (or dollar backed) assets like USDC, BUSD, or USDT.

But concerns for risk and value preservation are just the tip of the iceberg. The issues around centralization and regulation are significant. How can we say that stablecoins are decentralized if they are pegged to centralized monetary systems? And where will sentiment settle for the US and other nations around stablecoins? What is their endgame in a reality where billions of dollars of their currency derivatives are living on the blockchain?

Silk sidesteps all of these concerns by design. Not only does Silk outperform the US dollar in rigorous back-testing, but it has the benefit of being a more globally inclusive approach to money.

How does the basket work?

Every stablecoin has a derivation source for its value. Most stablecoins are pegged to the US dollar. But there is a lot of unacknowledged risk in that approach. Silk avoids that risk and can absorb massive amounts of global volatility while maintaining stable value.

Rather than being pegged to a single value (like the US dollar) the basket is a weighted index. The composition of the Silk Currency Basket includes select global currencies (USD, CAD, EUR, JPY) as well as commodities such as Bitcoin and gold. The inclusion of multiple currencies within the Silk Currency Basket provides increased peg stability relative to individual currencies. After careful research and testing, gold and BTC earned their place in the basket because they have historically outperformed currencies and serve as reliable stores of value.

As a result, Silk proves to be more stable than any single currency while preserving value for holders.

How can I mint Silk?

Minting Silk requires collateral. More specifically, Silk is “overcollateralized” so that fluctuations in collateral value do not impact the solvency of Silk.

Currently accepted collateral is stkd-SCRT, stLUNA, stATOM, stOSMO, axl-USDC, axl-DAI, and IST. In the future, users will be able to collateralize other IBC enabled stablecoins such as CMST and USK as well as wBTC, wETH, and potentially XMR when the time is right. If you want to hold one of these assets for a while, you can provide it as collateral to mint Silk and then provide liquidity or trade with the minted Silk.

Each of these assets has a unique loan-to-value ratio (LTV) based on the historical volatility of the asset. Having Silk overcollateralized by multiple uncorrelated assets puts Silk on safer ground than being backed solely by one or two assets.

Ultimately, a stablecoin is only stable to the degree system-wide redemption against the asset is possible. Silk solves for stability by having five different stability mechanisms:

Bounded Conversion Minting  

Overcollateralized Minting

Redemption Pools

Collateral Redemptions


If you’d like to dig into each of these further, read this.

How is Silk positioned for the current (and future) regulatory climate?

Silk avoids the regulatory scrutiny of 1:1 fiat derivative stablecoins by being pegged to a global index of value instead of a single currency. The first stablecoins to be under fire from governments will be derivatives of their own currency (since those create the most risk).  

Silk’s value composition couldn’t be more different from the aforementioned. If regulatory threat dictated the removal of a currency from the basket, governance could adapt the basket. Since the basket is flexible, Silk can adapt to any global macro scenario over time. This is the definition of antifragility.

What makes Silk a next generation stablecoin?

Silk is the world’s first-ever private and basket-pegged stablecoin. This coupled with its decentralization and the dynamic flexibility of the peg — it is quite promising.

It seems like a new stablecoin is born every month. What makes Silk different?

Silk is globally inclusive

Silk is private yet compliant and auditable

Silk is stable - one might even say antifragile

Silk is interoperable and reflexive

Each of these design features taps into massive narratives with seismic significance.

Silk is born into the Cosmos ecosystem where we believe in the app chain thesis. Silk is betting on the idea that there will not be one blockchain ruling over all - but hundreds of thousands of blockchains with each customized to the needs of their network. Silk is a viable currency for the interoperable future of blockchains.  

Silk is betting on privacy because crypto can’t survive without it. The transparency that typifies crypto transactions is a barrier to adoption. Silk is privacy preserving and upholds the human right of privacy.

The global economy is an uncertain place, yet Silk is architected to serve as the ultimate hedge against inflation and macro volatility. Whatever unpredicted scenario happens next - Silk can (and will) adapt to that.

So if you’re looking for a decentralized, private, and globally inclusive stablecoin you don’t have to wait any longer or look any further. Private stability is here.

Stablecoin Summit Highlight - $USK

Shade Protocol is an ambitious array of application-layer products focused on a simple end user experience that involves the incorporation of privacy by default. These interconnected privacy-preserving DeFi products built on Secret Network will change DeFi as we know it — empowering the next generation of value creation and exchange. Shade Protocol is launching Silk: a privacy-preserving over-collateralized stablecoin pegged to a basket of global currencies and commodities, built on Secret Network.

Without privacy, DeFi is incomplete. Traditional financial markets offer a degree of privacy for users, and as a result offer up greater protections in some capacity than existing DeFi markets. Shade Protocol will be the world’s first truly cohesive decentralized and privacy-preserving financial applications — ushering in a golden era for Web3. Shade Protocol will always push for privacy by default, privacy as an expectation, and privacy as the key to unlocking the full value of a decentralized future.

But we can’t do this without community. We need you to join our community and help make Silk and Shade Protocol a reality.

Join The Shade Protocol Community

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