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Shadows Network — A Summary

On Thursday the 28th of January, the DuckDAO community had an AMA with Ted Shao, COO and co-founder of Shadows Network.

“The backbone of web 3.0 as a store of value”

Shadows is a decentralized synthetic asset issuance protocol built on Substrate. The value of these synthetic assets is underpinned by DOWS, and as long as DOWS is locked in a smart contract, synthetic assets can be issued.

The network features a unique debt pool design mechanism where the trading of synthetic assets is essentially a transfer between debts. Smart contracts automatically execute the conversion of a synthetic asset to another synthetic asset without an order book, without counterparties, and without the problems of liquidity and trading slippage.

Participants:

Shadows — Ted Shao — COO and Co-founder

DuckDAO — Limmy — DuckDAO community representative

Please note that the following summary has been edited for clarity.

Limmy

Welcome everyone to another DuckDAO AMA.

We are joined today by Ted Shao from Shadows Network (It almost feels like I am doing an intro for a supervillain)

On behalf of the DuckDAO community, I’d like to welcome you to our channel :)

Ted

Hello, everyone. Thanks for having me.

Limmy

Can we start with an introduction for yourself — what is your background/experience both in the traditional space, and crypto space?

Ted

Sure, I’m a scientist by training. Nowadays, doing Science is almost like running a company. To do a project, you need resources from different parties and you need to write grant proposals for funds. Then you need to sell your ideas/products to a larger audience. Well, doesn’t this sound exactly like what I’m doing as COO for Shadows? I work with advisories & partners (including Ducks!) from all over the world to help Shadows reach the global community.

I started to follow the crypto world in 2018.

That’s how I got to know the CEO Iror.

Limmy

Ah, so you’re actually a relative newcomer to the crypto world. Can I ask what the field was that you specialized in when you were a scientist?

Ted

Climate Sciences, a lot of computer modelling work 😁

Limmy

Very cool 😁

Can you tell us a bit more about the rest of the Shadows team that can’t join us today?

Ted

Iror has been in the crypto world since 2013 and he has led several crypto projects like games and wallet projects. The last wallet project, the team managed to get over 70,000 users. Our CTO used to work for a top Chinese internet company — he is an expert in blockchain technology and particularly smart contract development. Now he leads a team of developers with senior full-stack developers and UI designers in the group. We’re also expanding our dev team. Our CMO used to work for a top tier CEX in China. She will be in charge of the business in China and integrating resources.

Limmy

Thanks, Ted! As you know we are an English-based channel so many of our users aren’t too familiar with what goes on in China in this space. We look forward to getting to know you and Shadows a bit more during this AMA.

Let’s dive in!

Could you please explain how your platform’s debt pool design mechanism works, and what makes it unique?

Ted

Great question, the debt pool is the key. Debt in the pool is created by DOWS collateral. This process also creates a stable coin — xUSD. Trading on Shadows is just allowing users to transform one kind of debt (e.g. xUSD) to another (e.g. xGold or xTesla). Since the process only involves minting/destroying synthetic assets, users don’t have to worry about liquidity or slippage.

Limmy

Any plans to add xGME? Haha

Ted

haha, the cool thing in Shadows is users can use DOWS to vote/propose the synthetic assets they want. Sure we can add xGME if it keeps FOMO

Limmy

Ah cool — I believe we have a question about the governance model a bit later.

Can you talk about some of the benefits of introducing offline financial assets into the blockchain ecosystem?

Ted

Yes.

  1. Increasing trading efficiency and liquidity;
  2. Blockchain technology will reduce the opportunity cost and the time cost associated with trading;
  3. Of course, privacy

Limmy

That makes sense — it’s a lot easier to trade a synthetic asset than gold bars haha. More discreet too!

Ted

Also in some countries, you’re not allowed to hold real gold bars.

Limmy

Huh — I didn’t actually know that. Add that as point number 4 — Access to more assets!

This next question was pretty popular — a lot of people wanted to know about your name. Where does the name “Shadows network” come from, and what does the logo represent?

Ted

So bringing a real-world asset into the crypto world is like a mapping. Our CTO came up with the idea that we can use shadows to represent such a concept. Our CEO is a big fan of cars. In the Chinese language, the meaning of Shadows is quite close to Phantom. All of a sudden this picture came to our CEO’s mind.

You can see from Shadow’s logo, there is a pair of wings — one represents the real-world asset, the other synthetic asset.

Limmy

I must admit I am a little disappointed that your origin story does not involve forming a secret order to fight Batman or something haha. The name is very cool though — definitely something that is distinctive.

We’ve talked a little bit about the advantages of synthetic assets, but what kind of limitations exist when converting assets to a synthetic asset (if any), and where will your focus lie — the cryptosphere or traditional financial markets?

Ted

For properties like real estates, it’s challenging to give it a price as no single property is the same. That’s actually something we are exploring with our collaborators to see if we can work out a case. That being said, we’d like to focus on cryptos first — like xBTC. Now the advantage of xBTC over BTC is that by holding xBTC, the user will earn DOWS!

And of course, the price of xBTC is always the same as BTC. So there is already a financing feature here. Next, we plan to focus on synthetic gold and stocks. If Shadows had existed last year, our users could have enjoyed the massive capital gain from holding xTesla 😁

Limmy

I’m sure that there will be many more opportunities for massive gains in the coming months/years.

Are there any assets you will not be able to synthesise onto the network? Conversely, are there any assets you are particularly interested in / looking at first? E.g. gold and/or silver?

Ted

Well, there is perhaps little point in adding used cars onto Shadows as used cars are easy to trade in the real world and every car is different. Our order would be cryptos > gold/silver> popular stocks. Again, if you hold a lot of DOWS, you can propose to add any synthetic asset you would like to have and we’ll deliver it to you :)

Limmy

So in theory… if I had a whale friend I could tell him to buy up a massive amount of DOWS and then ask you to add used cars? 😂

Ted

Haha, then we’ll do that!

Limmy

Haha noted 😁

Can you explain some of the legal ramifications of censorship-free cross-border circulation and transactions of synthetic assets? What are the laws and regulations pertaining to users of this service that they should be aware of?

Ted

On Shadows, synthetic assets such as xGold, xTesla are not equivalent to physical gold or Tesla stock. Essentially, all synthetic assets are just different forms of cryptos, albeit their prices are linked to those in the real world. So holding/trading synthetic assets on Shadows is like holding/trading cryptos. If that’s legally okay in your country, then it’s fine. Shadows just provides a decentralized platform, like Uniswap.

“Essentially, all synthetic assets are just different forms of cryptos, albeit their prices are linked to those in the real world. So holding/trading synthetic assets on Shadows is like holding/trading cryptos. If that’s legally okay in your country, then it’s fine.”

Limmy

I see — so the rules for the crypto asset class in your home country dictate the regulations and rules. Very cool.

Is there a minimum amount of DOWS required for a user to be part of the governance system?

Ted

1000 DOWs is the minimum amount of token you need. The more DOWS you have, the more power you have, to the point you can even add a used car onto Shadows.

Limmy

^ Take note used car lovers 🤣

Services and interactions on Shadows are built around smart contracts; the technical security of assets depends on the underlying code of smart contracts. Has the smart contract been audited? Is there any safety mechanism to prevent over minting?

How does Shadows deploy/manage a smart contract?

Ted

Every smart contract in general is subject to security issues. Our dev team diligently do a code review to avoid bugs. When our demo is launched, we will commission a third party to review our code. For each type of synthetic asset, we plan to set an upper limit on total minting as well as the amount any individual can mint such that we don’t create whales.

Shadows’ smart contract will be deployed on the Ethereum network first. In the meantime, we’re developing our own parachain -Shadows, which will be compatible with Ethereum.

Limmy

We know some people that can help with the third-party audit 😜. As I am sure you do as well.

Ted

Of course!

Limmy

The current market trend has seen a lot of users become very wary of the risks involved in smart contracts, so our next question is also a hot topic issue: Insurance.

Do you have any plans to partner up with an insurance-based project, or develop/take out insurance cover on your platform?

Ted

When Shadows is officially launched, we will consider joining forces with well-known insurance projects on the market that have been safely operated for a long time. We will also launch a fund such that when security issues do occur on Shadows, this fund can compensate for those who are affected.

Limmy

Excellent! 😁

How do you intend to draw market share from other synthetic protocols that have significant networks and user base/token holders? Protocols such as Synthetix, Injective, and Linear?

Ted

Let’s look at an H2H- Shadows vs Synthetix.

As you can see, Shadows benefits from both the Ethereum and Polkadot ecosystems. We believe people will make the right choice 😁

Limmy

Haha, that is some confidence — I love it! 😁

Will Shadows Network obtain a Parachain slot on Polkadot or you plan to integrate with other projects that will obtain a parachain slot?

Ted

It would be ideal to obtain a Parachain slot indeed. But no one knows how much it will cost. We’ll try to collaborate with projects within the ecosystem to get a Parachain. At the same time, because our synthetic protocol is implemented by smart contracts, it’s actually quite flexible. Even if we don’t get a slot, we could use a Parathread instead of a Parachain to achieve things like cross-chain.

Limmy

Thanks, Ted. Ok, so this brings us to the end of the structured segment.

We’ll now open the chat for those that have any further questions they wish to ask.

Please take your pick out of any questions that are submitted and we’ll finish up once you’ve answered them or you run out of time. Just post in the channel or send me a DM to let me know you’re done :)

To our community:

Please keep the questions nice and concise — don’t throw a wall of text at our guest(s) please! I’ll close it up again when we get a good number to choose from.

Duck (User @smithshanny)

What are the benefits of investing long-term in your token?

Ted

When holding DOWS, there will be rewards for each transaction that happens on our network. There will be staking rewards, you can participate in system governance as well as getting minting rewards. More details in our whitepaper!

Duck (User @jessekerluke)

Are the Shadows meant to be possibly adopted by other crypto projects and outside of blockchain space as well? What kind of advantages does it bring to, for example, financial institutions adopting the protocol?

Ted

We always seek collaborations with other crypto projects and yes we have been in touch with traditional financial institutions to explore how Shadows can help to solve their problems. In our debt pool, people who hold xTesla and xGold can trade with each other. That’s something that won’t happen in the “real world”.

Limmy

Thanks again for your time today Ted — the session has been both enjoyable and enlightening.

I would encourage everyone here today to head over to the shadows telegram if they have further questions they wish answered.

Find Out More About DuckDAO🐥

DuckDAO is a community-backed digital asset incubator that provides promising early-stage crypto startups with the expertise, financial resources, and marketing power needed to fast track their progress on the path to success.

Who will win? One VC or a thousand ducks?

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