— Synthetix ⚔️ (@synthetix_io) June 5, 2020
Starting with the Halite product release, the protocol implemented a number of front-end improvements such Synth Overviews, Debt Trackers, and the ability to easily see the weekly inflation being allocated to the different liquidity incentives on Mintr. For those unfamiliar, the rewards allocated to these programs are constantly changing, and with this new update, it’s easy to see which programs are most attractive at any given time.
SNX Balancer Liquidity Incentives
This upgrade also adds in new SNX Balancer Pool incentives in which users who contribute liquidity to the SNX-USDC Balancer pool are eligible for a pro-rata claim on 8k SNX per week. What’s unique about this program relative to something like the sETH/ETH Uniswap incentives is that Balancer also rewards users with BAL governance tokens through their Liquidity Mining program. Plus, with the distribution being skewed 90/10 in favor of SNX, those providing liquidity to this pool do not have to worry nearly as much about impermanent loss. Just 24 hours after launch, we’ve already seen the pool spike to nearly ~$1.5 in total liquidity.
Moving into more protocol focused improvements, the Altair release included the integration of three new SIPs – 15, 56, and 57. Many have been quick to point out that SIP 15 is the biggest of these three – namely due to the ability for undercollateralized staked SNX positions to be liquidated at a discount similar to Maker Vault liquidation.
“Synths can be redeemed for staked SNX at a discount if the collateral ratio of a staker falls below the liquidation ratio for two weeks.”
For those unfamiliar, Synthetix requires a minimum 800% over-collateralization ratio on outstanding Synth debt. With this new mechanism, if a C-Ratio has not been adjusted above the minimum threshold for two weeks, the underlying collateral can be liquidated less a liquidation penalty. As illustrated in the SIP, the liquidation penalty will vary relative to the price of SNX and how undercollateralized the position is. What’s important to know is that anyone can act as a Liquidator by burning the outstanding debt (say sUSD) in exchange for an equivalent amount of SNX collateral from the original staker + a liquidation incentive. This means someone who ratifies undercollateralized positions stands to earn SNX for doing so.
This feature is set to make Synthetix’s Global Debt Market far more sufficiently collateralized, especially in situations where staked SNX has been left unattended. With this and the upcoming introduction of ETH as collateral, we expect Synthetix to continue to shine in the coming year.
As Synthetix continues to deliver on its proposed product roadmap, the Synthetix Discord continues to be one of the most active in DeFi. Backed by innovative trials such as the Layer 2 Beta Exchange competition, it’s no surprise many have had nothing but high praise for the sector-leading derivatives exchange to date.
Now, with the launch of protocols like UMA, it will be interesting to see how the two derivatives protocol interface and bump into one another. From my viewpoint, it would seem that Synthetix is taking a cautious approach in terms of the type of Synths being introduced – namely those with a tangible real-world value like gold, oil and equity indexes.
On the flip side, I presume UMA will carve out a more creative? niche with traders going deeper down the crypto-possible rabbit hole. To paint a clear example, UMA’s first synthetic asset – ETHBTC – tracks the relationship between the price changes of ETH and BTC. Taking this a step further, I suspect UMA to be the breeding ground for unique reference indexes which are not directly competing with Synthetix and their established framework for introducing proven asset types.
If one thing is for sure, derivatives are quickly starting to heat up, and we strongly recommend keeping up with the sector over the coming months.
To stay up on all things Synthetix, follow them on Twitter or join the conversation on Discord.
Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.