Shell Protocol : Capital-efficient AMMs

Shell protocol is the next-gen protocol that aims to simplify building capital-efficient AMMs. Such AMMs can evolve, offer composability and provide an efficient way to transact at low gas cost. This offers a complete ecosystem for the fundamentals of Defi (such as NFT markets, algorithmic stablecoins, and lending Pools) to disrupt the Defi Industry.

Shell Protocol: Proteus and the Ocean

The two fundamentals on which Shell Protocol is built are the

1. Proteus: An AMM Engine
2. The Ocean: A Ledger for DeFi primitives

Proteus : An AMM Engine

Just like an operating system offers an abstraction layer between the software and the machine, Proteus, or the AMM Engine, provides an abstraction between the low-level complexities of the AMM and the financial Engineer.

Writing an end-to-end smart contract for AMM can be pretty expensive and tiresome. Also, there is a risk of losing Millions or billions of Dollars with a minor bug. Hence Developers at Shell Protocol decided to build an AMM Engine that offers a feature to the financial engineers to integrate their trading strategy through a specialized interface directly.

Proteus offers an efficient way to create liquidity pools with tailormade bonding curves and strategies. It is highly scalable and flexible, offering concentrated liquidity for LP tokens. With Proteus, you can generate more efficient curves than any other AMM in the defi space. Proteus's everyday use cases are stablecoin Liquidity Pools, liquidity Mining, and different Managed Pools.

Ocean: A settlement layer

There are many primitives in Defi Space, such as AMM, non-fungible token Markets, stablecoins, and various lending pools. Such primitives are connected or composed to offer unique financial applications in defi space.

Composability is an essential feature of Defi Space that opens the doors to new inventions. Consider a scenario where a user wants to lend Eth. To reach the final goal, the user can deposit the Eth and get a USDC token, which can be used as collateral to get more Eth. This good composability allows the defi community to do such transactions and design unique ways to reach the end goal.

Looking at the current Scenario, for even a tiny swap or trade, a user needs to interact with the different protocols and wait for every transaction to succeed. Also, its gas consumption is pretty high and costs a lot. This blocks users from conducting atomic transactions for use cases like arbitrage trading.

A few projects are trying to solve this problem, such as DEX aggregators like 1inch. But there is still a tremendous amount of work required. Also, they need big teams to build some adapters to compose different primitives constantly.

With the help of Ocean, any primitive such as an ERC20 token can be quickly composed into an ERC721 with a low gas fee and without writing any extra code.

The three Fundamentals Followed by Ocean are the following:

Every primitive uses a similar kind of pattern. For example, while Swapping any Token like DAI for Eth or USDC, the AMM would take the tokens from the wallet and transfer the resulting tokens to the wallet.

All the steps or the secondary transactions do not need to be broadcasted on Blockchain. While a user makes a transaction, there are many primitive steps like adding and subtracting balances, but in the final transaction, there is only one final balance. Storing all such information on Blockchain could be costlier than keeping it in memory. Hence instead of updating every time, the data can be stored in memory to save the gas fee.

The token balance of any wallet is just a number. It's stored in different contracts. Intuitively, having a single codebase and ledger for all tokens would be better as it would save a lot of gas fees.

How does Ocean Work?

The Ocean combines all three fundamentals and offers three main features

• A single ERC1155 ledger for all the tokens
• Standardized Accounting Framework for all the tokens
• Stores all the secondary transactions in memory instead of storage.
  

An Ocean is a complete end-to-end accounting system for all the Defi primitives and new primitives to be invested. Several primitives built through the Ocean framework would be relatively less complex because of the three main fundamentals.

Summary

Shell protocol offers a complete end-to-end solution for transacting different primitives such as stablecoins, NFTs, and ERC tokens. Also, with the AMM Engine, the financial engineers can easily integrate their bonding curve and trading strategy to implement their kind of AMM. With the help of Shell protocol, a user can save a significant amount of gas for any transaction, such as swapping or trading an NFT. The Shell Protocol team is constantly working to make a paradigm shift and improve the UX of Defi Applications.