Core Innovations
Precise pricing for on-chain perpetual options
Applying mathematical knowledge of stochastic processes, volatility, and partial differential equations with initial margins, Shield finds the exact solution of Shield perpetual option funding fees. Meanwhile, Shield applied the nonlinear cutting process and succeeded in implementing the pricing on-chain by replacing the exact solution of the nonlinear pricing model with a linear computation to find an approximate solution. After hundreds of data back-testing, the error between on-chain pricing and pricing falls within 5‰. This breakthrough in the pricing model with the exact number is also of great significance in the financial engineering academic community.
The additional information is available in Pricing Method Paper.
Dual liquidity pools
The dual liquidity pool allows the private pool to hedge the market-making risk, while the low-risk public pool can accommodate huge liquidity to guarantee abundant liquidity on the market.
On-chain random matching engine
Shield pioneered the first on-chain random order-taking algorithm. Newly opened orders are randomly generated by two random factors: the hash of the block and the block time, and the remainder is taken using the current private pool length, i.e., the order is assigned to the corresponding private pool first. If the private pool is critical or the available balance is insufficient, it is polled sequentially until an available private pool is encountered.
Liquidator and decentralized brokerage system designed based on game theory
Liquidators compete to receive 150% of the gas expense as arbitrage rewards while a decentralized brokerage system incentivizes brokers to bring a steady stream of traders to the Shield network through education and referrals
Last modified 5mo ago
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