What is a Stablecoin vs. Non-stablecoins

The main difference between a stablecoin and a non-stablecoin lies in their price stability and the mechanisms used to maintain their value.

A stablecoin like SILK is a type of cryptocurrency designed to minimize price volatility by pegging its value to a relatively stable asset, such as the U.S. dollar, or a basket of assets. The aim is to provide the benefits of cryptocurrencies (e.g., fast transactions, decentralization) while avoiding the high price fluctuations associated with non-stablecoins.

On the other hand, non-stablecoins, such as Bitcoin (BTC), Ethereum (ETH), or Shade (SHD), are not designed to maintain a stable value. Their prices are determined solely by market supply and demand, often resulting in significant price volatility.

  • $SHD: The governance and treasury token used for staking rewards, grants, and other DAO decisions

  • $SILK: A private stablecoin pegged to a basket of currencies and commodities. Silk is powered by Shade Protocol.

How are Borrowing fees adjusted:

Borrowing fees are assessed when SILK is borrowed and is taken out of the borrowed SILK (e.g. if the user borrows 100 SILK with a 1% borrowing fee, they will receive 99 SILK in their wallet and have an outstanding debt of 100 SILK). The borrowing fee will be based on borrower demand (higher demand collateral = higher borrowing fees) and tail risk of the collateral (higher tail risk = higher borrowing fees). Since the borrowing fee is charged when a loan is taken out, there is no impact to existing borrowers when the borrowing fee changes.

Adjustable Interest Rates on Shade Lend:

Interest rates per overcollateralized minting vault will be determined based on the historical volatility trends of an asset. Interest rates can be raised or lowered by the protocol to capitalize on demand. Variable interest rates will automatically adjust interest rates based on borrowing demand.

What is interoperability:

In order for Silk to become the de facto stablecoin of Web3, it must be compatible with a range of blockchains and Web 2.0 products. Bridging solutions for Silk are inherited by extension of being native to Secret Network. Silk is compatible with the following bridges:

  • Inter Blockchain Communication Protocol (IBC)

  • Binance Smart Chain

  • Ethereum

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