# ShadowLoan \[NEW]

## ShadowLoan: At a Glance

### ShadowLoan is a **decentralized borrowing and stability platform** built on **Polygon**, designed to provide users with a way to leverage gold-backed assets while maintaining stability, transparency, and rewards. It’s <mark style="color:orange;">based on Liquity’s proven model</mark>, tailored to bring innovation and reliability to our community.

***

## In simple terms:

* **Deposit collateral** (gold as PAXG).
* **Mint stablecoins** pegged to USD.
* **Earn rewards** while supporting the protocol’s stability.

## **How It Works**

1. **Vaults (TroveManager):**
   * Users deposit collateral into vaults to mint stablecoins.
   * Vaults are safeguarded by liquidation thresholds, ensuring solvency.
2. **Stability Pool:**
   * Users deposit stablecoins into the Stability Pool.
   * This pool absorbs liquidations, stabilizes the system, and rewards participants with native tokens.
3. **Fees & Rewards:**
   * Borrowing and redemption fees provide revenue.
   * Rewards include the protocol’s native token and potentially gold-backed assets.
4. **DAO Governance:**
   * Future decisions, including treasury allocations and system upgrades, will be managed by a **community DAO**.

## **Minimums and Collateral Ratios**

### ShadowLoan requires a **minimum loan amount of&#x20;**<mark style="color:yellow;">**$400 USDS**</mark>, which translates to approximately <mark style="color:yellow;">**$800 in PAXG**</mark> collateral at the time of loan initiation. This reflects a **collateralization ratio of 200%**, which is a desirable and strategic benchmark for the following reasons:

1. **Stability and Security**: Maintaining a 200% collateralization ratio ensures the system remains robust, even during market fluctuations. By requiring double the loan amount in collateral, the risk of liquidation is significantly reduced for borrowers.
2. **Volatility Mitigation**: Gold, while relatively stable, is not entirely immune to price fluctuations. A 200% collateralization acts as a buffer, protecting both borrowers and the system against sudden market dips.
3. **System Health**: A higher collateralization ratio ensures the protocol remains overcollateralized, fostering trust and long-term viability for all participants.
4. **User Protection**: Borrowers with a 200% collateralization have more breathing room to manage their loans without immediate risk of liquidation, offering greater flexibility and peace of mind.

This requirement balances accessibility with security, providing users with a straightforward and resilient borrowing framework. It also ensures that ShadowLoan operates as a sustainable, efficient ecosystem, ultimately benefiting all participants.

## **Key Features**

* **Built on Polygon:** Low fees and high scalability.
* **Gold-Backed Collateral:** Stability in volatile markets.
* **Transparent Mechanics:** Ten smart contracts ensure decentralized operations.
* **Community-Driven Governance:** A future DAO empowers user participation.
* **Fully audited**. View the audit [here](https://github.com/SpyWolfNetwork/Smart_Contract_Audits/blob/main/October_2024/ShadowLoan_TESTNET.pdf).

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<figure><img src="https://3755529528-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FwNjHKNic2XCChCVqJmUe%2Fuploads%2FqnEIBAxEYHp3H3Pgttgf%2FScreenshot%202025-01-27%20at%201.09.23%E2%80%AFPM.png?alt=media&#x26;token=16aa5dd2-c652-4665-b03f-ea73f70ee012" alt=""><figcaption><p>The ShadowLoan dashboard.</p></figcaption></figure>

## **Why It Matters**

* **Revenue Potential:** Liquity and its forks have generated over *<mark style="color:orange;">**$35 million in protocol fees**</mark>*, proving the success of this model.
* **Reliable Collateral:** Gold provides a hedge against market volatility.
* **Proven Foundation:** Liquity’s mechanics, deployed with enhancements for our unique approach.

***

## My original master plan: A Self-Sustaining Wealth Loop

1. **Buy and Hold ShadowGold (SDG):**\
   As a holder, you earn passive rewards in real gold (**PAXG**).

   ⇩
2. **Reinvest Your PAXG:**\
   Take your earned PAXG and put it to work by opening a **ShadowLoan Trove** (collateralized lending). Use PAXG as collateral to mint USDS (the ecosystem's stablecoin).

   ⇩
3. **Earn Through the Ecosystem:**\
   With your USDS:

   * Stake it in the **Stability Pool** to earn liquidation rewards in both PAXG and SLT.
   * Diversify your earnings with **Staking Pools** for consistent yields.

   ⇩
4. **Reinvest and Expand:**\
   Loop back by:

   * Converting PAXG rewards into more ShadowGold to increase your stake in the system.
   * Adding to your Trove or staking positions to multiply your rewards.

   ⇩
5. **The Compounding Loop:**\
   Watch as your participation compounds wealth—**holding, earning, reinvesting, and growing.** This system is designed to fuel itself, rewarding commitment to the ecosystem.

***

## **What’s Next?**

ShadowLoan is **not the final destination**—it’s proof of our ability to build and deploy a sophisticated system that will ensure our ride into the future. The roadmap includes:

1. **Standalone Deployments:** Expanding beyond Polygon to new ecosystems.
2. **DAO Implementation:** Putting governance in the hands of the community.
3. **Ecosystem Expansion:** Introducing new utility, integrations, and partnerships.

This is just the beginning. Together, we can shape a more innovative, decentralized future.

***

## **Addressing the Narrative**

We’ve faced challenges—tightening regulations, market volatility, and the evolving DeFi landscape—but we’ve **kept building**. This protocol is our statement:

* Proof of resilience.
* Proof of capability.
* Proof of progress.

### I know, **gold** and **Polygon** haven’t captured the attention we envisioned, but this foundation allows us to pivot, evolve, and deliver something extraordinary. Change isn’t failure—it’s growth. With love - E.

### [<mark style="color:red;background-color:yellow;">S</mark><mark style="color:orange;background-color:yellow;">ee why Liquity is a proven pivot.</mark>](https://docs.shadowfi.com/features/shadowloan-new/the-liquity-ecosystem-a-proven-success)