RadioShack DeFi

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The Starfish Topology (Shack Token's Primary Utility)

RadioShack's unique Starfish Topology hopes to achieve to offer two unique competitive advantages:

- Instant and deep liquidity service to new, promising protocols
*without*locking up ETH/DAI/USDC and alike - Low slippage through concentrated and therefore deep liquidity pools

A major problem in today's DEX's that RadioShack is planning to solve is the issue of liquidity dispersion. The following graph shows the typical liquidity dispersion model currently in use throughout the industry:

Typical DEX topology

Solid lines denote deep liquidity pools, thinner lines denote medium size liquidity pools, and dotted lines show very shallow liquidity pools. Since liquidity pairs are often added without much planning, the graph's connectivity is low and most paths involve thinly spread liquidity pairs. In graph theoretic terms:

- The average distance of the graph (adjusted for depth of liquidity) is high and connectivity is low
- The diameter of the graph is large

For example, in the above graph, to swap from USDT to DAI two possible paths are available:

- Route #1 - Direct from USDT to DAI: That's the dotted edge connecting the two nodes (USDT and DAI): This edge has low liquidity therefore the price impact and slippage will be high. This is not an ideal path.
- Route #2 - USDT > USDC > WETH > DAI: This path avoids very low liquidity edges. But involves 3 hops of varying degrees of liquidity. It's better than Route #1 but still not ideal.

The above example shows the main issue with chaotic and dispersed liquidity addition. To solve this problem, RadioShack needs to significantly reduce the diameter of the graph, and increase its liquidity-adjusted connectivity. This will be achieved by using a single large-degree node (the SHACK node) to create what we refer to as *The Starfish Topology. *In this topology, the tokens are linked with the RADIO token in a hub and spokes structure, which has a much lower liquidity-adjusted average distance and a smaller diameter. Furthermore, the Starfish Topology has the benefit of having way fewer edges compared to the previous graph, thus concentrating the liquidity and creating deeper pools that can offer lower price impact and slippage. Furthermore, the Starfish Topology attempts to balance the depth of the liquidity among its 'limbs' by moving liquidity incentives to the thinner but high traffic limbs.

The Starfish Topology

In the new topology, the same USDT to DAI swap in the first chart will go through two efficient and highly liquid paths: USDT > RADIO > DAI

Now on to the next huge advantage of using the Starfish Topology...

If the SHACK token is deeply paired with majors (USDC, ETH, DAI, USDT etc), then providing deep liquidity to a new token is as simple as pairing the new token with SHACK.

Now imagine that the RadioShack community wants to onboard a new, promising token onto the platform. As we know, new protocols are often rich in their own token but poor in majors (USDC, DAI, ETH). Therefore, it's a real pain-point for almost all protocols to lock up their new token with a huge amount of scarce collateral (e.g. USDC) to create a deep liquidity pool.

In other words, pair SHACK with majors through deep liquidity pools (limbs of the Starfish). Once that's achieved, adding new tokens require no further collateral (other than SHACKs). This is a huge win-win scenario that solves a real world problem. Of course, RadioShack will remain super selective and only approves partners with a promising project.

Last modified 14d ago

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