This time we are going through one of the most interesting and controversial projects in the ETH sphere: SYNTHETIX (ticket: SNX)
This article won’t go deep on the SNX fundamentals, but it’s more focused on the upcoming move to L2-OPTIMISM and the events related to it.
As you might know, Synthetix (SNX) aims to mirror certain real world assets and stocks on the blockchain. Thus, someone could invest in a token that’s pegged on the traded value of stocks like Tesla or Amazon.
Mind you, you aren’t buying the real thing or an inverse synth pretending to be the real thing (as many hedge funds do legally in the traditional stock market) , but you are being exposed to a tokenized price feed that follows the trends of the stock chosen.
As SNX aims to tokenize the entire stock market, it needs to have low cost transactions and some proper solution on issues like frontrunning, that would make a crypto stock exchange unreliable. Thus, it recently went for a L2 solution in the form of OPTIMISM, starting to moving operations there, and as SIP-121, already supporting sBTC, sETH, sLINK and, of course, sUSD, synthetix take on a usd-pegged stablecoin.
In future SIPS it will bring:
- Debt Pool Caching Mechanism
- Deprecation of iSynths
- Reductions of synths on L1
After that, natural shorts on all synths and even synthetic futures, both derived from Chainlink oracles, already used for the price feeds.
There will likely be a Synthetix DAO to provide rewards on L2 usage to incentivize migration. Maybe an airdrop for L2 users too.
You will also mint your own synthetic assets using synthetix’s liquidity to attach chainlink-verified price-feeds to any real world asset.
As of now you can mint sUSD with staking, as staking is taking the lend out synths with liquidity given by stakes receiving sUSD as collateral.
Now, while everything might look good and bright, it’s worth address the possible issues with this project:
2- INFINITE LIQUIDITY
1 & 2 FRONTRUNNING & INFINITE LIQUIDITY
Whales can liquidate pretty easily whomever they , as long as they have enough capital to control the volume. If you buy high you’ll have to pour money to unlock part of your stake. To burn any debt you’ll have to add money to get your tokens back (see CRATION).
A possible solution might come from major adoption of KWENTA (snx decentralized exchange) and DHEDGE (SNX decentralized hedge fund), as they would drive more people and more volume in, thus making it harder for whales to manipulate the volume and price of assets.
While moving on L2 would remove classic frontrunning, as Mev and other tricks would become less sustainable, you could still frontrun by volume manipulation, as oracles will still follow the rules of the market. If you move the market with enough money before anyone else, oracles, by their own nature, will reflect that.
Technically, by being exposed to tokenized price feeds, rather than reverse synths, you are not trading a fake asset, thus it wouldn’t be considered counterfeit. It’s still a grey area with the need for regulations. Also, Uniswap has recently removed Synths (snx derivatives), albeit they are still available on the protocol. That shows a fractured landscape in crypto. Was it lip service to regulators? Uniswap abusing its frontend position? Or crypto politics, with Uniswap trying to maintain its position?
We’ll see in the future, which looks full of promises and drama
Anyway, Thanks for the attention and see you soon!
If you wanna help out, check
- BULKSENDER, great for sending various eth transactions together, saving some time and gas (pretty high lately)
- OPENSEA, the premiere nft marketplace on ETH. As NFTs are regaining traction in the cryptosphere, you might want to grab something and see it appreciate further
- BLOCKSTER, a Q3/Q4 up-and-coming crypto social media. They are still airdropping tokens, so get in while it lasts. If the bullrun resumes, it could lead to some nice gains
If you wanna go the extra mile and throw some tokens you don’t need, feel free to send them here: