Shell Protocol introduced Proteus: the new AMM engine

Shell Protocol presented on Wednesday October 13, through its Twitter account, Proteus, the new AMM engine that powers the Shell Protocol v2.

Image about the Shell Protocol post on Twitter

“In front of the island of Pharos, an old god of the sea lives among the waves. It is primordial, older than man, and its power of endless self-transformation is as vast as the ocean. We hope you find our latest release an appropriate tribute”, he said through an article posted on the Medium platform.

The company explained that the Proteus AMM engine is a tool that allows developers to create liquidity pools with custom peg curves. Like its namesake, Proteus is incredibly flexible, allowing for concentrated liquidity with fungible LP tokens. The new algorithm makes it capable of generating more efficient capital curves than Uniswap v3 or Stableswap.

Additionally, in conjunction with the announcement of the Proteus engine, Shell Protocol is releasing two pieces of accompanying material. The first is the Proteus white paper, which explains the underlying algorithm responsible for the engine’s capabilities. The second is a reference implementation of Solidity, which allows developers to explore and test a sample liquidity pool built with Proteus.

What is Proteus? How does it work?

According to the company, Proteus’ purpose is not to create the most capital efficient AMM per se. The purpose is to build an AMM engine that can implement any business strategy. That way, financial engineers can design business strategies without having to write a line of Solidity code. An operating system is a layer of abstraction between application developers and a computer’s hardware. The Proteus AMM engine is a layer of abstraction between financial engineers and the Ethereum virtual machine.

How is this possible? In his view, an MMA’s business strategy is determined by the shape of its peg curve. For example, a flat link curve has highly concentrated liquidity, while one with a high curvature has diffuse liquidity.

Also read: PieDAO and UMA Protocol launch KPI Options

“Proteus uses a link curve algorithm based on conic sections, highly flexible geometric objects. This allows the algorithm to replicate virtually any curve, any trading strategy. While it may sound complicated, the algorithm is based on math that you could teach a high school student. In the following figure, we fit Proteus to a Stableswap curve”, he added.

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