Ve(3,3) evolution subverts Decentralized Finance! Shadow Exchange leads Sonic to solve the dilemma of Uniswap

In the cryptocurrency circle, (120bTc.coM): In the recent primary market, the public chain Sonic led by ‘Decentralized Finance godfather’ Andre Cronje has defied the market doldrums, creating ecological prosperity through new projects, new activities, and new wealth-generation benefits. Under AC’s leadership, the Sonic on-chain Decentralized Finance protocol is thriving, with many protocols in the ecosystem attracting users through innovative mechanisms or high-yield benefits. Among them, the Decentralized Finance protocol Shadow Exchange directly presents the enhanced version mechanism of ve(3,3)x(3,3), successfully attracting market attention.

Ve(3,3) is what?

Before understanding x(3,3), we need to first understand its predecessor ve(3,3). ve(3,3) was initially proposed in 2021 by the Decentralized Finance legend developer Andre Cronje. The main goal of ve(3,3) is to solve the distribution and management issues of Decentralized Finance tokens by combining Curve’s ‘Ve-Token’ with Olympus’ ‘3,3’ concept.

The main concepts are:

• The token issuance is adjusted based on the amount of locked tokens.
• Longer lock-ups will also generate higher APR, thereby incentivizing longer lock-ups The percentage of ve tokens held changes with the issuance.
• Token holders can convert their locked positions into NFTs for secondary market trading

From these ideas, it can be seen that the obvious drawback is that the withdrawal liquidity mechanism of ve(3,3) is not efficient enough, and NFT is essentially just packaging debt rights.

Evolution version x(3,3) can perfectly solve the impossible triangle of DEX?

Looking back at the history of Decentralized Finance, the “trilemma of DEX” also troubles many protocols, which includes “traders”, “liquidity providers LP”, and “token holders”, and the incentives between the three are difficult to balance.

And Andre Cronje’s ve(3,3) theoretically solves this problem, but at the same time, the model requires long-term locking, indirectly reducing overall participation willingness.

• The first generation of Uniswap: focuses on the interests of traders and LPs, ignores the rights of token holders, and the ecosystem is prone to vampire attacks by other protocols.
• The second generation ve(3,3): By adjusting the rights of token holders, the triangle is balanced, but the mandatory participation and lack of exit mechanism reduce user willingness to participate.
• The third generation x(3,3): Adding a mechanism for instant withdrawal on top of ve(3,3), and replacing the lock-up period with an incentive mechanism.

Principle of Operation of Shadow Exchange

And based on the new mechanism x(3,3), what functions does shadowex change use to mitigate the shortcomings of traditional DEX? The following are the main functions of shadow exchange:

1. Three token mechanism

Shadow establishes a mechanism through three generations of tokens, including Shadow, xShadow, and x33.

• $Shadow: As the protocol’s native token, it is tradable on the market
• $xShadow: Through Shadow hosting exchange, xShadow can pledge, vote for rewards, and of course, use the ‘exit mechanism’ to exit liquidity.
• $x33: x33 is the liquidity version of xShadow, which can be freely traded on the market

2、PVP rebase

In the previous ve(3,3) model, the core model is to adjust the weight of the lock position through rebase to prevent lock users from being diluted in the subsequent token release.

While shadow exchange adopts the PVP rebase mechanism, which not only solves the dilution problem but also provides additional benefits. Instead, it replaces these two things:

• xShadow can obtain part of the earnings of users who choose ‘Liquidity Options’ through the ‘Emission Exits(’ mechanism. In simple terms, when the protocol distributes new tokens, they will be divided into ‘Liquidity Option Shadow’ and ‘Non-Liquidity Option xShadow’. Users who choose Shadow rewards will transfer part of the tokens to other stakers, while those who choose xShadow can enjoy additional APR rewards.
• The exit mechanism of xShadow will confiscate a certain proportion of Shadow, and the confiscated tokens will be returned to the stakers.

3. User Logout

User exit is, as the name implies, to allow xShadow holders to freely enter and exit the market without being subject to forced lock-up restrictions. However, this exit method will inevitably have a penalty mechanism. The exit mechanism is as follows:

• Immediate withdrawal will incur a 50% penalty
• After partial period withdrawal, a proportional penalty of ) will be imposed, for example, a 27% penalty will be imposed after 3 months (
• Choose to withdraw after 6 months to receive a 1:1 liquidity

In addition, withdrawal can only be cancelled within the first 14 days. After the 14-day cancellation period, users cannot cancel it. Please note that xShadow cannot vote or Rebase once entered the withdrawal period.

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xshadow and x33 incentive mechanism

Next is the incentive mechanism. Currently, xShadow has three layers of profit incentives:

• The first layer is staking xShadow to receive 100% protocol fees
• The second layer is where you can receive additional rebase rewards after “active staking”, currently at 120.56%.
• The third layer is voting rights, and the pledgers can vote to select their favorite LPs, and rewards will be distributed every Thursday at the end of each Epoch, with the current LP’s APR ranging from 120% to 190%.

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As a version of liquidity, xShadow can automatically vote, reinvest rewards, and trade freely. Its multiple advantages also make its functionality significantly weakened compared to xShadow.

• First is the voting weight, compared to xShadow, the voting weight of x33 will be slightly reduced, the current data is 29.07%, in addition
• Also, as the exchange rate between x33 and xShadow will increase with the epoch, there may be a loss when redeeming x33 for xShadow.

Is Shadow worth ambushing?

Before discussing whether Shadow is worth investing in, I believe we first need to see if the Sonic ecosystem can attract long-term attention from the market, as the influx of market users and funds will determine how far DEX can go, and this is the first point.

Next, looking at Shadow’s TVL and trading volume, it can be found that Shadow’s TVL is growing at an astonishing rate, and the trading volume also continues the trend from last week, not just a flash in the pan.

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Additionally, due to Sonic’s provision of additional ecological incentive airdrops, coupled with Shadow’s newly created ‘exit mechanism’ that allows users to replenish some Shadow to the pledger when exiting, the protocol has delivered excellent APR performance to users. These advantages may continue to attract market investors in the future, until the APR falls to an appropriate level.

The emerging Sonic ecosystem, combined with x)3 and 3( innovative mechanisms, leads the author to believe that Shadow is a project worth adding to the watchlist. However, users still need to be aware of price and project team risks, and always DYOR first.