Synthetix is a permissionless derivatives platform built on Ethereum. Synthetic assets (called Synths) are created by staking Synthetix Network Tokens (SNX) which can be traded directly on the Synthetix exchange. Synthetic assets allow for exposure to real-world derivatives without having to maintain custody of the underlying asset while avoiding slippage, delays, or exchange withdrawal fees.
Users who stake their SNX tokens receive a weekly reward from a pool of SNX tokens that are minted via inflation. This mechanism is designed to drive the desired behavior in the Synthetix network and reward users for staking SNX. To learn more about Synthetix, check out our full review.
sETH Liquidity Incentives
Low liquidity is one of the biggest factors constraining the growth of decentralized exchanges. Incentivizing users to provide liquidity and algorithmically pooling it together is a powerful solution that leads to a better trading experience for all.
In July 2019, Synthetix announced a 4-week experiment to see if protocol level incentives would lead to a deep sETH/ETH liquidity pool on Uniswap. At the time, users who wanted to exit back into ETH after trading synthetic assets had to deal with slippage from low Uniswap liquidity for the sETH/ETH pair. As such, the campaign was designed to increase liquidity and provide a better end-user experience in a cost-effective manner after trading on the Synthetix.exchange.
To conduct the sETH liquidity incentive experiment, Synthetix diverted 5% of the weekly reward pool to holders of the Uniswap sETH pool token. At the time this was roughly equal to 72k SNX tokens, or $25k/week in incentives. The rewards are distributed based on each liquidity provider’s proportion of the total pool that week, and the sETH tokens must be held in the pool the entire week to qualify.
After the 4-week trial period, a Synthetix Improvement Proposal (SIP) was created and these incentives were officially implemented into the Synthetix platform under SIP-8. In February 2020 Synthetix announced a new Uniswap sETH liquidity provider reward system under SIP-31 which now requires users to stake their LP tokens to claim SNX rewards.
sUSD Liquidity Incentives
In March of 2020, Synthetix announced another 4-week liquidity incentive trial. This time, they looked to leverage liquidity for their native stablecoin – sUSD through iEarn and Curve. Each week 32k SNX are supplied by the Synthetix Foundation and distributed proportionally to users who stake their Curve Liquidity Provider (LP) tokens.
Here’s how you can earn your share of rewards!
sETH Liquidity Incentives
To provide sETH liquidity, users must hold ETH and sETH in the same wallet. sETH can be acquired from ETH directly on https://uniswap.exchange/swap.
To acquire LP tokens open https://uniswap.exchange/add-liquidity and make sure the ‘Pool’ tab is selected. ETH will automatically be selected on the top line, and select sETH from the dropdown menu on the bottom. Users will need to press ‘Unlock’ next to sETH to provide smart contract approval.
Enter the amount of sETH to add to the liquidity pool. The ETH value on top will automatically populate based on the current exchange rate shown at the bottom. After confirming the deposit amount, click ‘Add Liquidity’ and approve the transaction prompt. Once the transaction is confirmed, users will see their pool share updated with the percentage and total ETH + sETH amount.
The transaction will automatically stake the ETH and sETH in the Uniswap contract and issue liquidity provider tokens (UNI-V1) to the connected wallet in return. Next, open https://mintr.synthetix.io/ and connect the same wallet. Select the ‘LP Rewards’ tab on the top right, and click the Unipool option.
Click ‘Unlock’ to approve the smart contract and view the UNI-V1 balance, the amount currently staked, and any accumulated SNX rewards.
Click ‘Stake Tokens’, confirm the transaction, and boom! SNX rewards will automatically accumulate in a smart contract for users to withdraw at any time.
sUSD Liquidity Incentives
In order to participate, users need to hold sUSD and one or more of the other supported stablecoin (DAI, USDC, USDT or TUSD) in the same wallet. sUSD can be minted by staking SNX on https://mintr.synthetix.io/ or acquired directly on Uniswap. Seeing as they require 750% overcollaterization on Mintr, we recommend using Uniswap.
To acquire sUSD on Uniswap, simply scroll up and follow the same steps as aquiring sETH but with sUSD as the Output.
Once sUSD has been acquired, navigate to https://iearn.finance/pool, and connect to the supported wallet which was used to acquire sUSD. iEarn currently supports MetaMask, Ledger, and Trezor among other wallets. Once connected, click ‘Deposit’ to view token balances on the left and a recommended breakdown for adding liquidity on the right.
The bottom will display the number of Curve.fi sUSD/y.Curve.fi tokens users will receive for the inputted stablecoins on the lefthand side. Selecting ‘Deposit’ will trigger an approval notification for sUSD and each stablecoin selected.
After confirming these transactions which allow iEarn to transfer the assets out of your wallet, another prompt will automatically be followed with a ‘contract interaction’ notification. Confirm this transaction for the assets to be staked in the iEarn smart contracts in exchange for the sUSD/y.Curve.fi tokens which are automatically deposited into the connected wallet.
The next step is very similar to the sETH tutorial. Head over to https://mintr.synthetix.io/ and connect with the same wallet. Click the ‘LP Rewards’ tab in the top right and select the Curvepool option.
Click ‘Unlock’ and accept the transaction to approve the Curvepool contract to transfer your yCurve tokens.
After confirming, users will see their yCurve token balance, their amount currently staked, and any SNX rewards they’ve accumulated. Simply select the ‘Stake Tokens’ option and confirm the transaction to begin earning SNX rewards on a weekly basis.
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