Synthetix Network Tokens (SNX)

From Messari (9-2-2023):

Synthetix Network Tokens

Type	ETH Token
Total supply	140,384,615 SNX
Website	https://www.synthetix.io/

"Synthetix is a decentralized synthetic asset issuance and liquidity protocol that allows users to trade synthetic cryptocurrencies, fiat currencies, and commodities. Each synthetic asset tracks the price of an external asset through the use of Chainlink, Pyth, or Uniswap V3 TWAP oracles. Users can either trade in spot or in perpetual futures markets for synthetic assets. SNX is the native protocol token, responsible for governance as well as the primary collateral that backs the liquidity of the network. SNX can be staked as collateral for sUSD, the Synthetix stablecoin, which can be traded on Synthetix for any other synth (sAsset). The DAO uses a novel V3 Governance Module (V3GM), which uses councils of appointees who are voted on by SNX holders."

Basics

• Based in: Sydney
• Started in: 2018
• A decentralized platform on Ethereum for the creation of Synths: on-chain synthetic assets that track the value of real-world assets
• From Messari:

"Synthetix is a decentralized synthetic asset platform that provides on-chain exposure to real-world currencies, commodities, stocks, and indices. These synthetic assets (Synths) are backed by Synthetix Network Tokens (SNX) locked into a smart contract as collateral. Synths track the prices of various assets, allowing crypto-native and unbanked users to trade P2C (peer-to-contract) on Synthetix. Exchange without liquidity limitations. Previously, this project was launched as Havven (HAV), a decentralized stablecoin protocol."

History

• From this article (20-2-2020):

"The project was initially more widely known as Havven and had its ICO in February 2018. The token was HAV. Havven’s goal was to test payment networks through the creation of a synthetic stablecoin backed by the HAV collateral made available by stakeholders. As a result of this experiment, the developers realized that much more could be done."

• It rebranded in November of 2018.
• First planned out to launch on EOS but moved to Ethereum instead. They wrote a blog post (27-8-2019) on why EOS (and Tezos) were unsuitable.

Audits & Exploits

• Bug bounty program can be found here. Max payout is $100,000 (29-6-2020).
• Scored 97% on DAOmeter (21-2-2023), had zero of the categories scored perfect. Scored low on Security (multis-sig) and Proposal (no stored on-chain), and a little low on Community (manual payroll and no clear on and offboarding), Voting (no staking for voting, elections, no custom tooling), Documentation (no tokenomics documented), Security (multi-sig) and Treasury (multi-sig and no custom tooling).
• Got back to 97% on DeFi Safety (25-5-2022):

"Synthetix has been audited 20+ times, both before and after deployment. Audit history can be found here."

With the comment:

"Over the past two months, Synthetix has worked hard to achieve a 97% score, and is tied for the current top score with @LiquityProtocol! As such, it is time to syntherely congratulate the protocol and underline what went into this groundbreaking effort.

First, Synthetix has always had a rock-solid base. Its technical documentation is anything but artificial and does a great job at covering its entire smart contract architecture. Moreover, the traceability of the source code implementations is excellent.

Speaking of source code, Synthetix has one of the most well-developed GitHub repositories that we have seen. Testing depth is commendable, and all unit testing is fully available. A formal verification puts a cherry on top of these vast software development standards.

On the security side, Synthetix has to have some sort of audit record, as they have over 30 of them for nearly all releases. Although a larger bug bounty reward could benefit the score, we have no doubts that proper due diligence has been enacted.

Synthetix is also very transparent about its access controls. The protocol relies heavily on proxies, but each change needs to pass by two different governance models and MultiSigs: the Spartan Council, and the Protocol DAO. This ensures that upgrades are done in good faith."

• Then scored 85% (10-5-2021), mainly went down due to Access Controls "The capabilities for change seem very high, but no limits are mentioned. There are no specifics, so score 10%" With the comment: "All near perfect except Access Controls. They say updated docs coming soon. Can't wait and will update."
• Previously scored a 96% (13-10-2020); "The audit history page shows regular d audits taking place. There were eight audits in 2020 alone (before mid-August) from two independent auditors. The audit results and documentation appears meticulous and complete."
• From DeFi Weekly (11-3-2020):

"Ownership

The good news here is that there's 4 addresses that are required to make changes to the main contract.

The bad news here is that there's no time lock so if everyone signs off they can make the change instantly.

Architecture

Synthetix's entire architecture heavily relies on proxies. From an integration point of view, it means that the Synthetix system you interact with one block might actually look completely different the next block (if they push an upgrade). Even the tokens have their own proxies that they're deployed behind.

Audits

From digging through their code, it looks like they do use tests but one thing which stood out was that their tests are integration tests, not unit tests. The difference being that their tests check to make sure things work, not that they can work/defend against malicious or unintended inputs.

General Commentary

I'm being a bit opinionated here but I found Synthetix's developer tooling to be just okay. Their Javascript library relies on JSON ABI files to be updated rather than using Typescript typings which provides integration guarantees. Set, dYdX & 0x use Typescript and to great benefit. Their Javascript library doesn't have extensive testing to ensure that any ABI changes are breaking throughout their system. It's not a major deal but tells me more so about how much a team cares about developer experience and the ease of which to integrate their smart contracts in an external system."

Oracles

"The team does run some of their own oracles which you can view directly over here.

It's essentially just one address that publishes prices to a smart contract and updates it. I'm not sure the opsec would be on these but we know for sure it's connect to a hot wallet. In Synthetix's case having multiple private keys internally that are connected to the internet is a massive danger. I've faced this issue working as a developer in places I've worked but unfortunately there is no good answer at this point in time. My only recommendation to the team is to slow down and figure out a more robust opsec procedure before adding another 10 centralised oracle price feeds to your network as Synthetix will eventually become a CEX honey-pot. The team does have an aggressive roadmap they're trying to achieve, hopefully they know when to slow down, focus on the base and when to aggressively ship."

• Blockchain Security DB (29-6-2020) shows 13audits. The latest was in 3-2020.

Bugs/exploits

• Stakers lost ~$2M on market manipulation of TRB.
• Synthetix logic error disclosed, $150k bounty (9-7-2022).
• Samczsun found (26-3-2020) a bug in the Synthetix release;

"The code is deployed to mainnet but is not yet active, so no funds are at risk. The code requires an explicit switch from the protocolDAO and can only be activated at the end of the three month trial period which is two months away. Despite the code is not being active we have decided to pause new Ether Collateral loans until we can deploy a fix.

The Ether Collateral contract upgrades were audited by Sigma Prime there was a misunderstanding as to the intent of the liquidation process specced in the SIP. In addition this was put through code review internally unfortunately this issue was missed and was not covered by our internal tests, this lack of test coverage is something we will address moving forward to ensure we increase test coverage from 95%+ to 100%.

We will be working closely with our audit partners Sigma Prime and Iosiro in the future to ensure we minimise the possibility for future incidents such as this through clearer communication."

• Certora found (12-2019) a reentrancy bug, which has been fixed.

Governance

• From Crypto Briefing (15-8-2020):

"After two years and multiple pivots, Synthetix decommissioned its governing foundation. In its place, the core team set up three distinct DAOs to ensure the smooth sailing continues. The SNX token will soon be at the center of these DAOs, giving individual token holders power in the governance process. Token holders will be able to vote out elected DAO members, even overriding their decisions in certain circumstances."

• From DeFi Watch (9-3-2020):

"The Synthetix smart contract ecosystem is fully upgradeable and very centralized, according to the core team. The core team may have vast power to do just about anything, including adjusting user balances and draining funds. No specific information has been released about the power of Synthetix's admin keys or their security."

• From their blog on decentralization (17-12-2020):

"Currently the core team act as custodians. Token holders don’t have the power to remove or reassign aspects of control right now. However, while suboptimal, it is not dire, as the sole alignment between all token holders is the value of the network which is represented by the SNX token. The foundation does not capture value from activity in the network other than through holding SNX tokens. There is no privileged position for any particular entity in the network by design. Additionally all core team members are token holders, so the SNX token represents the upside in the success of the project for all participants."

Admin Keys

• From DeFi Safety (25-5-2022):

"Synthetix' relevant contracts (Synthetix, FeePool, Synths) are identified as upgradeable via its Proxy structure, as identified here. Synthetix mentions that the Proxy contract allows for state upgrades in their key smart contracts. The protocol further explains change capabilities as being essentially limitless. However, each change must go through a rigorous voting process. Synthetix's pause control is documented and explained in this location. The author explains that the introduction of pause control will be iterated and tested regularly. However, no "fire drill" was visibly recorded in the past 3 months.

Synthetix no longer uses timelocks, as described here. However, each improvement proposal has to go through a voting period as well as an implementation period which both require MultiSig votes. As such, the second MultiSig vote for implementation following the proposal approval vote essentially acts as the two-factor verification process that a timelock typically offers, since there are no other ways to upgrade the protocol. Furthermore, implementation can be further delayed in the event of an emergency, but this must also be voted upon by the MultiSig."

• The following information comes from a spreadsheet (4-2-2020) created by Chris Blec.

"Current Admin Key Config- Time Lock: unknown [no]

Current Admin Key Config- Multisig: unknown [Yes, 4 keys]

Claimed Admin Key OpSec: None

Verified Admin Key OpSec: Unverifiable

Is security of deposited funds dependent on opsec of admin key?: Yes

Admin Key Address: Unknown [Known]

Documentation on Admin Key Powers: None found [Some exist]

Additional Info (if any)? Currently advertised as centralized"

DAO

• Towards the end of Q3 2024, SIP-408 was passed, introducing a new method for making changes to the Synthetix DAO: Synthetix Referendums (SRs). SRs gave voting power for proposed changes to SNX tokenholders, rather than representative Council members. Not long after the passing of SIP-408 and the creation of SRs, a monumental change to Synthetix DAO was proposed and passed, via SR-2: A Synthetix Reboot.
• From a commissioned Messari report (14-2-2023):

1. "The introduction of the V3 Governance Module (V3GM) marks another evolution of Synthetix’s governance structure and on-chain voting on the Layer-2 (L2) Optimism.
2. Over the past year, many Synthetix governance proposals focused on building out the Synthetix suite of revenue-driven products, i.e., atomic swaps and perpetual futures.
3. Synthetix governance communications could be improved to potentially enhance the quality of decisions and accountability of council members."

• The three DAO's are in control of the protocol now (28-7-2020).
• From The Defiant (11-5-2020):

"The current overview of protocol governance is as follows:

The grantsDAO is established and is actively funding Synthetix public goods. There are five members including core contributors in the grantsDAO. To date 200k+ SNX has been allocated to the grantsDAO from the synthetixDAO.

The protocolDAO is established and is currently controlling protocol upgrades, the last two upgrades, Achernar and Hadar, were coordinated via the protocolDAO. We are currently working on a number of major upgrades to the protocolDAO to improve Opsec which will be published as SIPs shortly.

The synthetixDAO controls the protocol treasury and has been funding the operating expenses of the Foundation, specific projects and other operating entities since the token sale in 2018. The synthetixDAO is currently controlled by three key SNX stakeholders. We expect to expand this membership over time alongside the expansion of the protocolDAO and the handover of control of the protocol and treasury to token holders."

• From their blog (17-12-2019):

"The governance of the SynthetixDAO. This is far more challenging than coordinating movement of funds. I have stated previously I believe pure on-chain governance is fundamentally flawed and will lead to far more project risk than the risk of a foundation being captured. So it is imperative that the cure not be worse than the disease. The solution is for SynthetixDAO V0 to act as a custodian, essentially a similar role to that of the current proto-DAO. SynthetixDAO V0 will have a small number of members with equal voting rights. Members will be initially be constituted with major SNX stakeholders, but will evolve to include other key token holders over time.

Both Mintr and Synthetix.Exchange are open source and the community is free to make changes and submit PRs, however, the core team maintains these repos and has control of which PRs are accepted. We must ensure the front end interfaces are accessible anywhere and that there is not a single point of failure. There are a number of solutions to this that are currently available and we expect that community frontends will be one of the areas  incentivised in the future via the grants process."

• From Token Tuesdays (25-12-2019):

"Synthetix, the industry’s largest synthetic asset issuance protocol, announced its plan to transition to a DAO earlier this week in order to create an inclusive mechanism for token holders to govern the protocol and its underlying treasury. With this in mind, the announcement outlines a few key components necessary:

1. Legal & Operational -  In the past, it has been common practice to set up a non-profit foundation to coordinate protocol development within decentralized systems. This was due to the lack of robust frameworks for distributed fund management. Thanks to the rise of new DAO structures such as Moloch, Synthetix can now leverage an audited foundation for distributed treasury management, grants, and governance.
2. Protocol Changes - As it stands today, the Synthetix team is largely responsible for implementing protocol changes while receiving input from the community via Synthetix Improvement Proposals (SIPs). With that, the team is working on developing a protocol DAO to allow community members to be more involved with the SIP process.

While it would seem that protocol changes and product improvements are interchangeable, there’s actually a clear distinction between the two. To give you a better understanding, Synthetix.Exchange and Mintr are some of the products that exist on the Synthetix Protocol.

Drawing a parallel, Uniswap’s front-end exchange (the product) geoblocked a handful of countries while the core protocol itself remains censorship-resistant and accessible by anyone.  As such, the goal with Synthetix DAO is to decentralize and eliminate any single point of failure from the products that exist on top of the protocol. This can be accomplished through grants from the DAO and by ensuring that multiple products emerge outside of what’s been developed by the core team." 

• From their blog (2-8-2020):

"protocolDAO phase 1 (issue-98) — released

As of phase 0, the protocolDAO is a Gnosis Safe multisig that is now the owner of all mainnet contracts for Synthetix, and phases 1 and 2 involve transferring ownership to a delegated migrator contract, which will be owned by the Gnosis Safe multisig. It also controls a system pause function to be used in situations concerning upgrades or security. Two circuit breakers have been implemented, the Synth circuit breaker and the decentralised circuit breaker both of which prevent trading in the event of a price shock.

protocolDAO phase 2 (issue-235)

Phase 2 of the protocolDAO will be the release of the delegated migrator and the veto contract. These will ensure that future upgrades to the system can be vetoed under certain conditions by token holders.

synthetixDAO phase 1

Phase 1 is the migration of all Synthetix treasury assets to an on-chain DAO. This is dependent on the escrow contract migration SIP (SIP-60)."

Spartan Council

• Got changed in Q3 2024:

"Four of the seven seats would be directly elected by SNX holders, with the remaining three seats being hired on by the elected council members. Each elected position would have a six-month term, with elections held semi-annually in the first two weeks of April and October. The elected seats would consist of three advisory seats and a treasury seat. The hired seats would consist of a strategy, operations, and technical seat. All council decisions would require a 4/7 multi-signature approval, with all treasury-related actions requiring approval from the treasury council seat. For the first term, each council member will receive a stipend of 2,000 SNX per month, with the potential for a new incentive structure afterward."

• From Daily Gwei (13-11-2020):

"Announced a new ‘Spartan Council’ that very much looks like a typical board of directors. Basically, if this change is accepted by the community, a form of delegated governance would be introduced for Synthetix that allows SNX token holders to elect seven “council members” which elections happening every three months."

• Has gone through, and the first council has been elected (10-12-2020):

"The Spartan Council will be responsible for approving proposed changes to the Synthetix protocol. Initially, this will only include SCCPs (i.e. configurable changes on certain aspects on the protocol, such as changing exchange fees or the target C-Ratio), but the aim is to also include SIPs (i.e. more complex changes to the protocol) in the future.

The elected members will be on the Spartan Council for the first Council Epoch, which lasts until January 8 (0:00 UTC). That is, unless during that time SNX stakers amend their votes at council.synthetix.io so as to affect the placings — if one of the elected members drops out of the member placings, then they will be replaced by whoever took their place. If this occurs, this process will be carried out manually by the protocolDAO."

• From Our Network (16-1-2021):

"Council members received a limited edition NFT by Sam Gilmore, and if not re-elected, will be revoked and rewarded to the new council member(s)."

• Kain announced (6-2021) that he will run for the Spartan Council in order to coordinating Synthetix core contributors.
• HasGauntlet as some of their professional delegates (30-11-2022).

Aragon

• From Discord by Kain, the founder (12-5-2020):

“We are just using the Aragon framework. They have a very flexible and robust governance tool set we can integrate into Mintr for our governance functions. It’s not forking just using the governance tooling not all of it requires ant/anj”

Treasury

• From Delphi Digital (7-12-2020):

"Synthetix’s treasury grew primarily as a result of SNX’s appreciation since 2019. The SynthetixDAO, currently managed by core team members, stakes SNX to generate more of the token. Eventually, as Synthetix grows, the DAO will be able sustain itself off trading fees earned by staking SNX."

Token

 ICO

• Had its ICO in February 2018.
• From Token Tuesdays (3-9-2019:

"At inception, Havven [HAV] raised $250k in a seed round supplemented by a larger $30M ICO round priced at a reported base rate of $0.67/SNX. Lead by Synapse Capital"

Token allocation

• From Messari:

"100,000,000 SNX were issued in March 2018. 60% were allocated to investors in the Main Sale and the EOI Sale and 40% was allocated to the project treasury, with 3% reserved for Bounties and Marketing Incentives, 5% reserved for Partnership Incentives, 12% allocated to the foundation and 20% allocated to the team and advisors. The foundation allocation vested quarterly for 12 months and the Team and advisors allocation is vesting quarterly for 24 months."

Utility

• Token Use cases (from DeFi Weekly 11-3-2020):

1. "Inflation based staking rewards. By minting SNX assets, you effectively become a staker of the protocol. Because of this, you're eligible to earn more SNX tokens that come out of the inflation of the protocol.
2. Exchange trading feeds. Every time someone transfers a SNX-based asset they have to pay a fee. The aggregate of these fees can be claimed by stakers in the protocol.
3. Uniswap LP rewards. This is part of the first point but is important to note: anyone who mints sETH with SNX and provides liquidity for the sETH and ETH liquidity pool on Uniswap receives additional rewards. This is extremely important as it maintains price parity between sETH and ETH creating a liquid gateway between all of Synthetix's "synths" (synthetic assets)."

• From Token Tuesdays (3-9-2019:

"SNX holders can lock their tokens as collateral to mint new synthetic assets (Synths), which track the prices of fiat currencies, commodities, stocks, and indices. Everytime a Synth is generated, a transaction fee of 0.3% is accumulated and ultimately distributed to holders with locked SNX in the form of sUSD (Synthetix’s native stablecoin). In the first year that Synthetix was live, only 300 users out of the 75,000 token holders were locking SNX into the system. While it still resulted in 40% of the total supply locked as collateral, the team realized that this small incentive was not large enough to spur widespread growth in the system.

Back in February, Synthetix announced that they will be implementing an inflationary monetary policy as an incentive to bootstrap network effects. Over the next five years, the total supply will increase from 100M to around 250M SNX with inflation diminishing over time."

Token Details

• From Messari:

"A new monetary policy was introduced in 2019. This new policy introduces an inflationary supply to reward active stakers. Each year, for 5 years, the total rewards will be cut in half, starting at 75,000,000 SNX for the first year. The total supply will eventually reach 245,312,500 SNX by 2024."

• Since that Token Tuesdays about SNX, Synthetix has seen a significant amount of growth in the protocol and has surpassed Token Tuesday's upper valuation of $1.20. The following is from their follow up (27-11-2019):

"When we covered SNX back in September, the price was sitting at around $0.36 with total value locked hovering at around ~$40M USD. Now, Synthetix has soared past Compound to #2 on DeFi Pulse in terms of total value locked with over $166M in nominal value, representing a +315% increase in total value locked. In terms of token price, the current value of SNX sits at around $1.34, resulting in a +272% increase in price since September. SNX locked has increased a moderate amount in the past 3 months from 99.3M SNX locked to 123M SNX locked (+23.86% increase in the past 90 days). This can largely be due to a combination of new stakers and new SNX being minted as part of their new issuance policy. 

For those unfamiliar with Synthetix’s new issuance policy, there’s now a base issuance rate to SNX stakers on top of the fees accrued on the exchange. With that said, we can theorize that stakers are reinvesting their native issuance back into the protocol to compound their returns. As issuance continues to take place, we can expect that the total amount of SNX locked will increase in tandem as users continue to look to maximize their potential returns in the future."

• From this blog (10-2-2020):

"Incentivizing Uniswap pool liquidity is a high priority (especially considering the reliance), but using inflation to this extent initially as the method to achieve this will likely have pretty brutal effects on the META price – Using SNX as the example, there’s still yet to be any SNX unlocked from the incentivization pool - this starts in March, 2 note SNX price was $0.05 at that point last year, it’s now $1, my guess is there’s a large number of people who didn’t expect SNX to appreciate so much when they first locked their SNX - As this SNX is unlocked there’s going to be a continuous stream of SNX likely pointed towards the market."

Inflation

• From a Messari commissioned report (9-4-2024):

"The first full quarter of no SNX inflation saw little-to-no impact on the network staking ratio, and stakers earned an average 4.3% APY from trading fees. The number of stakers grew slightly to nearly 46,000."

• Synthetix ended SNX inflation (16-12-2023).
• SNX announced (24-9-2019) the smoothing of their inflation schedule.

Burns

• 50% of trading fees generated on V3 are sent to a burner address (27-9-2024), where they are used to buy and burn SNX, providing a deflationary effect on the token’s supply. Seems to have been changed (26-11-2024):

"Synthetix V3 on Base takes 40% of fees generated from perp trading and allocates them to buying back and burning bridged SNX. The full V3 perp trading fee structure is as follows:

40% for liquidity providers

40% for SNX buyback and burn

20% for integrators"

• Synthetix V3 burned $200,000 worth of SNX in Q3, raising the total amount of SNX burned to $480,000 since V3’s launch on Base in Q2 2024.

Cost of minting an asset

• From DeFi Weekly (11-3-2020):

"Synthetix has their own spin where you're actually in competition with other traders.

1. John uses 7500 SNX to mint 100 sUSD.
2. Jill also uses 7500 SNX to mint 100 sUSD
3. The network now has 200 sUSD worth of debt, where John and Jill account for 50% of the debt each
4. John decides to be a degen trader and purchase 100 sLINK (worth $1 each) with his sUSD (on which he'll pay trading fees for)
5. Now the price of sLINK actually increases to be worth $4 each so John's 100 sLINK represents $400 worth of value and Jill's position is still worth $100 (sUSD)
6. The network's total debt is now worth $500 in total. Since John and Jill are responsible for 50% of the debt each, John owes $250 to the network and Jill also owes $250 to the network
7. The difference between John and Jill is that John made $300 from the price appreciation so he's up a pure $150 ($100 + $300 - $250) while Jill is down $250.

Synthetix's term staking can be quite misleading in this way since it's actually just a incentivising people to open a trade position while taking on the risk of debt accumulating. There are no free lunches.

Note: you can trade synths without holding SNX or ‘staking’."

ETF's

• From The Defiant (10-4-2020):

"Synthetix was one of the first to create a tokenized version of ETFs with sDEFI, a token tracking the price of a basket of tokens linked to different DeFi platforms."

Coin Distribution

• From The Defiant (6-5-2020):

"Nine whales (addresses with more than 1% of circulating supply) own 65% of the total SNX tokens. 47.65% of SNX is in an address used for the Synthetix staking escrow and 6.61% for the Synthetix Foundation, according to data from Etherscan. Investors, addresses holding between 0.1% and 1% of circulating supply, hold almost 19% of SNX in circulation, while retail volume consists of only 15% of the current distribution."

• From DeFi Weekly #52 (27-11-2019): a16z bought $250k in Synthetix.
• Framework Ventures is the largest staker (27-8-2020) of the Synthetix protocol outside of the founding team.
• Kain has been open in saying he is the largest holder of SNX (6-2021).

Tech

• Whitepaper can be found here (3-2020).
• Code can be viewed here (14-5-2020).
• Built on: Ethereum and Optimism. Also moved to Base and Arbitrum and looking into Sui and Solana (8-4-2024). Has its own OP Stack Synthetix Chain which went live (9-2024).

How it works:

• From Messari:

"Synthetix is a decentralized trading platform for synthetic assets that looks to alleviate liquidity and slippage issues of DEX’s through a pooled collateral mechanism that enables users to convert from one synthetic asset (Synth) to another directly with the contract. Synthetix currently supports assets that track the price of fiat currencies, cryptocurrencies and commodities. Synths are backed by the Synthetix Network Token (SNX), which is staked as collateral to issue Synths. SNX holders who stake their tokens receive fees generated through trading activity on synthetix.exchange from which the value of the SNX token is derived. All Synths are backed by SNX tokens. Synths are minted when SNX holders stake their SNX as collateral using our dApp, Mintr. They’re currently backed at a 500% ratio (Update 17-12-2019: Users looking to create derivatives (Synths) must post 750% collateral in the form of SNX, and as of 3-2020 it is 800%) to ensure the system is buffered from major price shocks, however, this may be raised or lowered in the future. SNX stakers incur debt when they mint Synths, and to exit the system (i.e. unlock their SNX) they must pay back the debt by burning their proportion of Synths they minted.

• From the whitepaper (3-2020):

"SNX holders are incentivised to stake their tokens and mint Synths in several ways. Firstly, there are exchange rewards. These are generated whenever someone exchanges one Synth to another (i.e. on Synthetix.Exchange). Each trade generates an exchange fee that is sent to a fee pool, available for SNX stakers to claim their proportion each week. This fee is between 10-100 bps (0.1% - 1%, though typically 0.3%), and will be displayed during any trade on Synthetix.Exchange. The other incentive for SNX holders to stake/mint is SNX staking rewards, which comes from the protocol’s inflationary monetary policy. From March 2019 to August 2023, the total SNX supply will increase from 100,000,000 to 260,263,816, with a weekly decay rate of 1.25% (from December 2019). From September 2023, there will be an annual 2.5% terminal inflation for perpetuity. These SNX tokens are distributed to SNX stakers weekly on a pro-rata basis provided their collateralisation ratio does not fall below the target threshold.

Minting, burning, and the C-Ratio

The mechanisms above ensure SNX stakers are incentivised to maintain their Collateralisation Ratio (C-Ratio) at the optimal rate (currently 800%). This ensures Synths are backed by sufficient collateral to absorb large price shocks. If the value of SNX or Synths fluctuate, each staker’s C-Ratio will fluctuate. If it falls below 800% (although there is a small buffer allowing for minor fluctuations), they will be unable to claim fees until they restore their ratio. They adjust their ratio by either minting Synths if their ratio is above 800%, or burning Synths if their ratio is below 800%."

• From this blog (13-2-2020):

"Trading synths doesn't happen via peer-to-peer order matching like in majority of other DEX. It's peer-to-contract = traders do not exchange anything, they just swap one price oracle for other oracle and switch assets against the debt pool. The debt pool of synths is backed by SNX tokens staked by minters."

Upgrades

• From a commissioned Messari report (4-5-2023):

"The primary achievements of V3 can be summarized as:

1. The Liquidity Layer for DeFi Derivatives: protocols can leverage the existing liquidity in the Synthetix protocol to create pools/vaults/markets, which also gives stakers more optionality on where to allocate their credit.
2. Power to Stakers with Multi-Collateral Staking: increased optionality for stakers to target debt exposure, hedging ability, collateral type, and credit type through combining Vaults into Pools connected to one or more Markets.
3. A Composable, Developer-Friendly System: to simplify and improve the developer experience by making the system cleaner and increasing the tools available to builders.
4. The Future is Cross-Chain: allows assets to be teleported cross-chain using the shared liquidity layer."

• From a commissioned Messari report (14-2-2023):

"Synthetix launched Perps V2 on December 20, beginning with just an ETH perp option. Proposals have been approved to add assets. Thus far, the launch has been successful, with lower fees and strong uptake (more than 35% of perps volume between January 1 and January 28)."

• Synthetix’s Achernar release is live (20-2-2020), adding ETH as collateral and a bunch of other upgrades.
• Synthetix’s Hadar release (24-3-2020) includes Brent Crude oil, FTSE100 and S&P Global1200.

• From The Defiant (10-4-2020):

"Synthetix is exploring adjusting its economic incentives for liquidity providers across sETH and sUSD pools.

SIP 51 proposes to divert 64,000 SNX from native inflation into Curve in order to incentivize liquidity providers of the sUSD/USDT/DAI/USDC/TUSD trading pair on Curve. The diversion of native inflation towards the Curve stablecoin liquidity pool will come at the cost of sETH liquidity providers on Uniswap.

As a result, the Synthetix Improvement Proposal aims to reduce the Uniswap sETH liquidity incentives down to 32,000 SNX per week."

• From their announcement (6-5-2020):

"Synthetix and Optimism are extremely excited to announce a new demo of Synthetix.Exchange on OVM (Optimistic Virtual Machine), a Layer 2 (L2) scaling solution. This integration demonstrates the power of OVM to deliver high-speed Ethereum transactions to supercharge the Synthetix trading experience."

• Synthetix released Galena (23-7-2020). Frontend updates to the Binary Options section, updates to the simple search function, Index Synths now have a composition table.
• Synthetix V3 will include a Keep3r implementation (17-1-2021).

Staking

• From a commissioned Messari report (7-7-2023):

"SNX staker yield trended downwards over the last year, primarily due to the reduction in inflation rewards from summer 2022. More recently, yields have settled to 11%-16% for stakers. In addition, the makeup of yields has become more sustainable. Stakers cannot claim yield on their stake if they are below the required minimum 500% collateral ratio.

In April, Synthetix changed its inflation schedule by adjusting the target staking ratio response function. The staking ratio is the amount of SNX staked as a percent of the total amount outstanding. With SCCP 294, inflation will remain unchanged (currently 325,445 SNX each week) within a 12% band of the 70% target staking ratio. If the staking ratio moves below 58% or above 82%, inflation will increase or decrease by 10% each week. This function leaves inflation below a 5.5% annualized rate going into Q3."

• From a commissioned Messari report (4-5-2023):

"With the implementation of SIP-255, Synthetix changed how trading fees are paid to stakers. Instead of being distributed as rewards, trading fees (paid in sUSD) are now used to burn sUSD, the largest synth in the debt pool by USD value. This setup improves the health of the system by increasing the collateral ratio (no change in collateral but less debt) and still rewarding stakers who now owe less debt.

Stakers had their highest percentage of earnings from trading fees in Q1’23 compared to the last six quarters, with 56.3% of revenue coming from trading fees. The combination of inflation reduction and perps trading demand led to this new revenue mix. In the month of March, over 63% of staker revenue emanated from perps trading. As inflation continues to dwindle and the DAO adds trading pairs and increases open interest limits, the revenue source for stakers should continue to trend towards demand for the core product rather than inflationary rewards."

• From DeFi Rate (14-5-2020)

"At the time of writing, claiming SNX staking rewards on Mintr is estimated to cost $5.62. This means anyone staking less than ~1500 SNX (or roughly $1000) would be paying more to claim their rewards than the rewards are actually worth. The interesting thing about how staking rewards work on Synthetix today is that fees must be collected once every 7 days. If they are not collected, they are forfeited and rolled over into the fee pool.

This story is quite interesting because of the thought process behind changing the claims cycle. In the past, stakers originally had 4 weeks to claim. That was then changed to 2 weeks and is now down to its current cycle of one week. Looking at it from the Synthetix team’s perspective, the 4-week cycle resulted in many only checking Mintr ~once per month, largely meaning their C-Ratios (the amount of collateral to their sUSD minted when staking) was commonly unattended. By reducing the claims cycle, users would monitor their ratio more actively, providing a more adequately collateralized global debt pool.

While this intention is fantastic (and has been working quite well up until now) many community members are now being boxed out of collecting SNX rewards as it’s simply cheaper to purchase SNX on the open market than it is to claim staking rewards."

• From Token Tuesdays (3-9-2019:

"In essence, synthetic assets represent a combination of securities to simulate the price of a different underlying asset. As such, users can gain exposure to any supported derivative without ever having to maintain custody of the underlying asset itself. This allows users to quickly swap between abstract assets (say ETH to APPL shares) without experiencing any slippage, delays or exchange withdraw fees.

By using Mintr, synthetic assets called Synths are created by staking Synthetix Network Tokens (SNX) as collateral. Synthetix uses a private oracle to pull real-time information from credible financial market resources. As it stands today, the protocol currently supports synthetic fiat currencies, digital assets (long and short) and commodities. 

As it currently stands, Synthetix has 94.8M SNX (~70% of the total supply) locked in the system, up from 37.36M since March 2019. (Update 17-12-2019: 80% locked)

Earlier this year, the staking rate sat at around 40% of total SNX. With the new monetary policy, SNX saw a surge of new stakers on the network looking to claim the newly minted SNX coming into the ecosystem. This resulted in nearly 70% of SNX staked, according to DeFi Pulse. Over the next five years, we’re assuming that as the inflation rate continues to decrease, we will likely see a slight decrease in the overall percentage of SNX staked."

Validator Stats

• From a commissioned Messari report (14-2-2023):

"Despite the smaller debt pool, the number of unique active stakers increased throughout 2022 and by 4.2% in Q4. The number is likely aided by Optimism Quest, the liquidity mining operation that incentivized users to use applications on Optimism by offering OP token rewards.

With SCCP-208 in July, the DAO lowered the target staking ratio. When the actual staking ratio is above target, as per the mechanism design, inflation falls by 10% each week. After increasing over 34% in 2022, the SNX inflation rate is now below 10% on an annualized basis. The claims will be paid out next year after their one-year escrow. In 2022, 42 million SNX entered circulation after completing their vesting period.

A mirror of the inflation rate above, SNX rewards to stakers is escrowed for one year after claiming. Given the increase in the inflation rate in the middle of the year, 24 million and 23 million SNX will be released in Q2 and Q3, respectively – more than all of 2022. After the Q3 cliff, the lower inflation rate will mean fewer SNX entering the market with 11 million expected in Q4."

• From Our Network (16-1-2021):

"Staking activity has continued to grow steadily throughout the course of the year, with daily active stakers increasing ~187% over that same time period."

Liquidity Mining

• From The Defiant (17-3-2023):

"Synthetix plans to distribute over $8M of Optimism’s governance tokens to active users of its perpetual swaps platform. Daily trading volume on the protocol’s V2 iteration hit a record of almost $200M on Mar. 13, according to a Dune query. The program is scheduled to go live in the first week of April and run for 20 weeks."

Scaling

• From Yield Farmer (28-7-2021):

"Synthetix announces its synths can now be traded via Kwenta on the Optimistic Ξthereum layer-two scaling solution."

Interoperability

• From their announcement (17-7-2023):

"Synthetix now uses @chainlink CCIP for efficient, secure Synth liquidity transfers through the Synth Teleporter. CCIP paves the way for cross-chain Synthetix, expanding access to liquidity & markets across EVM-compatible chains."

Synth Peg

• From the whitepaper (3-2020):

"The Synth peg is critical to a well functioning system, because traders require both liquidity and stability between a Synth/s and other cryptoassets to take profits from trading. Some Synths trade on the open market, so it is possible for them to fall below par with the assets they track. Incentives are required to ensure that deviations from the peg are minimal and that actors are motivated to correct them.
There are three methods to maintain the Synth peg:

1. Arbitrage: SNX stakers have created debt by minting Synths, so if the peg drops they can now profit by buying sUSD back below par and burning it to reduce their debt, as the Synthetix system always values 1 sUSD at $1 USD.
2. sETH liquidity pool on Uniswap: each week, a portion of the SNX added to the total supply through the inflationary monetary policy is distributed as reward to people providing sETH/ETH liquidity on Uniswap. This has incentivised liquidity providers to collectively create the largest liquidity pool on Uniswap (at time of writing), allowing traders to purchase Synths to start trading or sell Synths to take profits.
3. SNX auction: Synthetix is currently trialling a new mechanism with the dFusion protocol (from Gnosis) in which discounted SNX is sold at auction for ETH, which is then used to purchase Synths below the peg." 

ETH Collateral

• Synthetix’s Achernar release is live (20-2-2020), adding ETH as collateral and a bunch of other upgrades. Traders can obtain a sETH loan for 150% ETH collateral and pay a 5% interest fee. The provisional "Skinny Eth" period will only last three months and traders must repay their loans by the closing of the period. After the experimental Skinny ETH Collateral period ends in May 2020, the initiative will be revisited and reformed based on trader and community feedback, as well as an analysis of the mechanics of the system.
• From this article (20-2-2020):

"With a 3-month trial period, Synthetix introduces ETH as collateral for the creation and exchange of synthetic tokens.

1. During the trial period, the maximum participation will be 5000 Ether. [they changed it to 1500] 
2. The minimum participation position of the individual will be 1 Ether. 
3. At the end of the trial period, all pending loans will be repaid. 
4. The minimum collateral locked in the contract will have to represent 150% of the demand for synthetic products such as sETH, sUSD, sBTC.

The management of this new form of collateral has been introduced respecting the needs of SNX stakeholders, in fact, unlike collateralization with SNX, ETH stakers will not receive commissions or rewards as they run fewer risks associated with the fluctuation of the price of SNX.

Prior to this update, the SNX token linked to the project was the only one to provide liquidity to the platform with a 750% collateral to cover the tradable Assets. 

However, the previous model had a number of problems: by exposing users to SNX-related price jumps, the platform was pushing away a less risk-averse part of the market, limiting the liquidity of the project."

• Some people had their critiques beforehand (14-9-2020):

"As an SNX holder, implementing ETH as collateral signals the SNX team is giving up on its main financial value proposition and saying, “Well, the market might think ETH is more stable, so we’ll implement ETH as collateral.” As an SNX holder, why would I want to hold an ECR20 token when the team itself is acknowledging it’s "safer" to stake with ETH? Is the prospect of future returns on the SynthetixExchange - a speculative value - enough to compensate my holding SNX over ETH and staking with ETH? By enabling collateralization with ETH, the SNX is basically validating those outside the system who question SNX’s value proposition of generating fees from the exchange."

• From their blog (19-2-2020):

"One other interesting implication is that it could have a positive effect on the sETH liquidity pool on Uniswap. At the moment, many LP’s are SNX stakers, who are providing the sETH they’ve minted through staking their SNX. In doing so, they’re sacrificing the liquidity of their Synth position in case of major market fluctuations. For example, if BTC pumps while you’re holding sETH you minted by staking SNX, your portion of the debt pool is exposed to that gain while you stay stuck in sETH. If the ETH stakers contribute to the liquidity pool instead, they take on less risk, as their debt will not fluctuate — they’ll be receiving the SNX rewards for sETH LP’s with less risk than SNX stakers."

Oracle Method

• Pyth is mentioned as oracle (7-3-2022).
• From DeFi Safety (25-5-2022):

"The protocol's oracle source is Chainlink documented at this location. In addition, all synthetic tokens covered by these oracles are identified here, and data refresh rate is provided for each one. Synthetix documents all front running mitigation techniques at this location. Flash loans are not applicable for Synthetix's synthetic assets. In addition, SNX could theoretically be flash loaned, but the only use case for those tokens would be to stake them. Since staked tokens enter a 7-day burn period, potential for flash loan manipulations is effectively mitigated."

• From The Defiant (11-5-2020):

"we will transition fully to Chainlink, removing the central point of failure in the current Synthetix oracle."

• Update (1-9-2020): After months of testing, Synthetix will use Chainlink price oracles to power all price feeds on the Synthetix exchange.
• From this list curated by Linda Xie on Github (8-4-2020):

"Oracle Method

Chainlink for FX and commodity price feeds with plan to integrate cryptocurrencies and indices in the future.

Other price feeds are determined by an oracle that pushes price feeds on-chain using an algorithm with a variety of sources to form an aggregate value for each asset.

The ExchangeRates contract (https://contracts.synthetix.io/ExchangeRates) will continue to be fed prices from the decentralized oracle. However, the logic for looking up prices will be extended with a mapping of Chainlink Aggregator contracts for each Synth.

Contract Addresses

• ExchangeRates: 0x9D7F70AF5DF5D5CC79780032d47a34615D1F1d77

Source

• https://blog.synthetix.io/chainlink-decentralizes-first-wave-of-synthetix-price-feeds
• https://www.synthetix.io/uploads/synthetix_litepaper.pdf
• https://sips.synthetix.io/sips/sip-36
• https://sips.synthetix.io/sips/sip-32"

Oracle attack

• From DeFi Weekly (11-3-2020):
• "During the early days of Synthetix, an oracle went down and someone used it (3-2019) to mint 37m SNX. This was a large shake up in people's confidence however the team aggressively moved to using Chainlink oracles instead."

Compliance

• From this article (13-10-2020):

"In summary, the Synthetix platform does appear to potentially offer a multi-lateral trading venue for derivative contracts that could be considered within the scope of MiFID i.e. enabling multiple parties to buy/sell derivatives in a manner designed to result in binding contracts. However, the absence of matching individual participants in a trade and the algorithmic nature of the trades complicate this picture and mean it could still be outside of scope depending on the interpretation of each Member State regulator, national law and ESMA. EU law is also very fragmented and much in need of updating in respect of the definition and supervision of regulated derivatives.

In addition, the lack of a legal person operating the trading venue would make the regulation or prohibition of the platform very difficult and, to the extent that the regulators wish to capture it, will require looking through the DAOs for one or more individuals that the regulator believes is the effective controller of the venue. Failing that it is difficult to see what regulators can do other than an outright ban on such a platform and product (with all of the novel difficulties that arise from seeking to prohibit smart contract interactions and settlements not mediated through financial institutions).

To the extent that Synthetix is used to create asset-referenced tokens (including stablecoins) then, subject to consideration of whether they are potentially algorithmic tokens, it could be fully within scope of the proposed EU MiCA regime subject to territoriality requirements."

Their Other Projects

Aelin Protocol

• From the Synthetix blog (18-5-2021) of Kain:

"I am working on a small side project that will enable anyone to raise a pool of capital to pursue a specific deal. This could be purchasing tokens from a treasury OTC, and then distributing them with a vesting schedule, which happens regularly. It could be access to an early stage VC round into a new project, or any number of other one-off deals. It is usually very hard to get access to these kinds of deals unless you are a major fund with significant capital to deploy. The opportunity space for what's possible once this structure gains momentum is vast and potentially quite creative.  It delivers on crypto's promise of open and transparent access while also helping fund quality projects through a novel mechanism. The governance token for this protocol (AELIN) will be distributed 50% to SNX stakers."

Kwenta (KWENTA)

• Has spun out and 'declared independence' (15-6-2021). Came back with a proposal to get acquired by Synthetix on 29-10-2024.
• From EthHub #34 (5-10-2020):

"This October, the Synthetix team will be launching the next generation of Synthetix.Exchange called Kwenta. Kwenta is a new derivatives exchange designed for users looking for multi asset trading and infinite liquidity."

• From the Synthetix blog (18-5-2021):

"Jordan came up with a plan to spin out Kwenta as a distinct team that will be able to govern and manage itself outside the larger Synthetix governance framework. In addition, it will likely launch a token that will be distributed to SNX holders and allow for its own distinct community to form. The plan is for Kwenta to have a dedicated team, initially consisting of existing Synthetix core contributors, as well as a number of additional contributors. The sDAO will provide support to ensure that the project is funded for several years, ensuring there are no resource constraints on the development of a crucial user interface for the protocol."

SNAXchain

• From the announcement (5-9-2024):

"The near term use of SNAXchain will be to act as a neutral space for governance to manage deployments across Optimism, Arbitrum, Base, and Ethereum Mainnet. There have been discussions about eventually making this chain the place to stake SNX and aggregate fees from various deployments. Further discussions have revolved around using this chain to build the next-gen Synthetix Perps product."

Synthetic Futures 

• Created a primer for it's futures (21-8-2020).

Synthetix sDeFi

• From Bankless (11-11-2020):

"With 12 assets featured in the index, Synthetix’s sDeFi is the oldest and most diversified index in the field. The index was recently updated a few weeks ago adding YFI, UNI, wNXM and CRV into the mix while removing ZRX, REP, LRC and BNT. That said, the sDeFi index includes a few other assets not featured in the DPI, namely NXM, UMA, and CRV.

In addition, unlike the DPI index, sDeFi’s index is a synthetic asset which tracks the price of the underlying assets rather than having all assets redeemable — this is an important distinction for those who may be interested in redeeming their index for the underlying assets."  

Roadmap

• From a commissioned Messari report (14-2-2023):

"In 2023, the Synthetix DAO is primarily focusing on the launch of Synthetix V3, an updated architecture for the liquidity provisioning protocol. V3 is a drastic change to the protocol and implementation, with no change at all to the intention or service to be provided. It strives to give lenders (SNX stakers) control over what they collateralize along with permissionless asset listing. The transition will include migrating sUSD to snxUSD and turning the current V2 protocol into a pool on V3. V3 is a drastic change to the protocol and implementation, with no change at all to the intention or service to be provided. It strives to give lenders (SNX stakers) control over what they collateralize along with permissionless asset listing. The transition will include migrating sUSD to snxUSD and turning the current V2 protocol into a pool on V3.

Pools will have managers that can set rules on which assets are accepted as collateral, known as vaults. They can choose which markets they offer the liquidity to – perps, spot, atomic, etc. Pools can also target rewards to different collateral types depending on their preference or on the debt pool. There is no launch date for V3 yet, but updates will likely come throughout Q1’23."

• Roadmap has been released (2-8-2020). It includes futures, BTC as collateral and trading incentives. Updated one for 2022 can be read here. Focussing mainly on synths for cross-chain movements.
• Roadmap found on Messari:

September 2019	Additional Synths	Adding long and short synths for XTZ, TRX, and MKR as well as equity and indices Synths
September 2019	Lending Partnerships	Partnering with a lending platform to allow people to borrow sUSD for ETH or Dai
December 2019	Decentralized Oracle	Partnering with Chainlink to decentralize the oracle for price feeds
December 2019	Leveraged Trading	Allow users to make up to 10x leveraged trades on synthetix.exchange

• From Token Tuesdays (3-9-2019:

" In the near future, the core team has announced expanded Synth sets including S&P 500 indices, DAI to sUSD conversions and open-sourced lending on protocols like Compound."

• Synthetix came with a roadmap update (10-3-2020), more detail on each provided in the link:

1. "Traditional asset classes - Equities, ETFs, Indices and more (Q2, 2020)
2. New crypto synths (Q1, 2020)
3. Leveraged Synths (Q2, 2020)
4. Binary options (Q3, 2020)
5. Advanced order types (Q2, 2020)
6. Trading incentives (Q2, 2020)
7. sX interface enhancements (Q1, 2020)
8. Optimistic Rollups (Q3, 2020)
9. Synthetic futures (Q3, 2020)
10. Ether/DAI/BTC collateral (Q2, 2020)
11. Trading delegation (Q1, 2020)
12. Mobile interfaces (Q2, 2020)
13. Differential fees (Q2, 2020)

The work required to support each of the above features is listed below:

1. Asset listing framework with continuous risk monitoring
2. ProtocolDAO expansion
3. Market closure handling (for traditional assets)
4. Price change circuit breakers
5. Chainlink migration"

• From The Defiant (11-5-2020):

"Over the next few months we will continue to make aggressive moves to decentralise the protocol with two large changes coming soon, the migration to protocolDAO v2 which will enable several new features including timelocks on upgrades and token holder upgrade veto power. In addition, we will transition fully to Chainlink, removing the central point of failure in the current Synthetix oracle.

We are confident that by the time we reach the middle of the year, the protocol will be almost maximally censorship resistant, with the removal of all of the unilateral controls the team currently administers.

Below is a high level plan for the continued transition to token holder control:

1. grantsDAO
   • Additional capital allocation from synthetixDAO
   • Expansion of membership
2. protocolDAO
   • Delegated migrator contract launch
   • Migration to Aragon
   • Timelocks on contract upgrades
   • Tokenholder veto power launched
3. Australian Foundation
   • Entity windup 
4. synthetixDAO migration to Aragon
   • Membership expansion
   • Transition to representative democracy"

Revenue

• From a commissioned Messari report (5-1-2024):

"Synthetix Perps had its best quarter by volume traded. Without any incentives, it powered over $13 billion for the second consecutive quarter. SNX stakers earned record fees in Q4’23, taking in nearly $10 million in the quarter. Over 95% of fees come from the Synthetix Optimism deployment."

• From a commissioned Messari report (14-2-2023):

"In 2022, users paid $37.5 million in fees to access liquidity on Synthetix. In aggregate, the fees were split nearly perfectly 50/50 between Synthetix’s L1 and L2 instances. However, in Q4’22, Synthetix’s Optimism instance earned 83% ($2.8 million) of all trading fees on the platform, likely aided by the launch of perps V2 on Optimism and Optimism Quests. Trading fees were dwarfed by the $231 million of SNX incentives paid out in 2022.

After $22 million in liquidations in the first half of the year, the second half of 2022 saw $11 million in liquidations of Synthetix. Liquidations on Synthetix reward other stakers by dispersing a percentage of the collateral staked (SNX) to active and healthy stakers"

Usage

• From a commissioned Messari report (7-7-2023):

"The quarter brought record-setting volumes for the protocol. This growth was attributed to a variety of factors: consistent product traction from Synthetix Perps; enhancements in front-end platforms such as Kwenta and Polynomial; improved UX from reduced execution delay; more underliers than any competitor (now 42 listed perps);  increased market activity; the cost-reducing Optimism Bedrock upgrade; reductions in trading fees to competitive levels with CEXs; and the OP incentives program. Despite the record volumes and OP rewards program, Synthetix experienced a downward trend in daily active users (DAUs) over the quarter."

• From The Defiant (17-3-2023):

"Synthetix plans to distribute over $8M of Optimism’s governance tokens to active users of its perpetual swaps platform. Daily trading volume on the protocol’s V2 iteration hit a record of almost $200M on Mar. 13, according to a Dune query. The program is scheduled to go live in the first week of April and run for 20 weeks."

• From a commissioned Messari report (14-2-2023):

"Volumes peaked in Q3 2022, led by atomic swaps. So far, all atomic swaps on Synthetix since the 1inch fusion have been beneficial to stakers, with more integrations coming soon. Fourth quarter volume was just under $623 million, down 86.5% from Q3. Perps V2 was launched on December 20 and is still in alpha (only ETH perps trading on select front-ends). However, in the final 11 days of the year, it accounted for 15% of volumes.

Synthetix is a liquidity solution. The protocol and collateral pool can be infrastructure for partners to use. The partnership with 1INCH drove tremendous volume to Synthetix in 2022 as the leading solution for large trades to avoid slippage on traditional DEXs. Kwenta is the leading perpetual futures protocol that uses Synthetix, and in times of volatility, Kwenta tends to dominate volumes driven to Synthetix. Decentrex is a recently launched perps protocol that will be leveraging Synthetix Perps V2."

• From Our Network (16-1-2021):

"Synth exchange volume broke its all-time high (ATH) of ~$57M on December 26th reaching $64.9M, which was quickly surpassed on January 3rd with daily volume spiking to $186M. This spike in daily volume could be attributed to the price action of SNX, which broke its ATH of $8.77 that same day. The stickiness of volume is further supported by the Volume Program that kicked off this past September, which incentivizes native integration of the Synthetix protocol across DeFi platforms and protocols."

• User numbers are still low on Synthetix (13-11-2020):

"While the exchange currently has 50 traders per day and nearly 5500 Ethereum addresses, the protocol hopes to attract more traders as they move to Optimism."

• From this tweet (6-10-2020):

"Synthetix's $sUSD has a supply of 74.7 million — 3x growth since July 1st. Despite clearly being an innovator -- e.g. 1st to integrate w/ L2 Optimistic Ethereum, Synthetix still has a relatively low number users. $sUSD minters peaked at > 1,000 in August."

• According to this (23-2-2020) tweet by Spencer Noon sETH pool is 26% of total liquidity on Uniswap.
• From Our Network #9 (21-2-2020):

"sETH has the largest Mcap of any Synth (synthetic asset) inside the Synthetix network and has demonstrated how effective a well designed incentive can be to drive desired behaviour. The incentive directs 5% of the weekly inflationary supply to those who add liquidity to the Uniswap sETH/ETH pool. Uniswap shows the steady increase of sETH supply over the past 5 months. The pool is now 26% of Uniswaps total liquidity and at one stage was closer to 50%.

The weight of sETH (currently 65%) as a distribution across all Synths is artificially high as a result of the incentive and is now seen as likely too heavy relative to the overall open interest across the network. The project will introduce a similar sUSD incentive to balance out the open interest and create a more natural distribution of Synths."

Projects that use or built on it

• Aelin
• Curve; "Curve now allows you to use Synthetix to do cross-asset swaps with minimal slippage and fees." (19-1-2021).
• Decentrix; perps protocol that will be leveraging Synthetix Perps V2 (14-2-2023).
• dHedge; live on mainnet, a social trading platform built on Synthetix.
• Kwenta
• Lyra; options protocol which will airdrop tokens to SNX stakers (5-7-2021).
• Melon; From Paradigm (8-12-2020):

"Melon integrates Synthetix: Melon approved the proposal (MFP#4) made by Simone Conti and Emiliano Bonassi for the integration of Synths within the Melon Protocol. The full proposal you can find here.

• Thales Market; binary markets which will airdrop tokens to SNX stakers (5-7-2021).

Pros and Cons

Pros

• Has been open about its centralization and worked towards 3 DAO's to be decentralized.
• Uses multisig for core contracts
• From DeFi Weekly (11-3-2020):

"One area which I was highly impressed with was Synthetix's documentation. They've got diagrams showing inheritance structures, easy to access contract addresses and plenty more which you don't usually find from DeFi teams."

• From the whitepaper (3-2020):

"Trading on Synthetix.Exchange provides many advantages over centralised exchanges and order book based DEX’s. The lack of an order book means all trades are executed against the contract, known as P2C (peer-to-contract) trading. Assets are assigned an exchange rate through price feeds supplied by an oracle, and can be converted using the Synthetix.Exchange dApp. This provides infinite liquidity up to the total amount of collateral in the system, zero slippage, and permissionless on-chain trading."

• From DeFi Weekly (31-7-2020):

"synthetic asset protocol, did an ICO, saw prices crash, allowed many people to get ownership of the network, price increased. Largest incentivised parties: thousands of token holders, team, foundation"

• When KuCoin got hacked (28-9-2020), many projects showed their centralized powers, however the Synthetix DAO voted against any action.

Cons

• Has no time lock on their multisig (2020).
• Neither (11-3-2020) Nexus Mutual or Opyn cover Synthetix's contracts.
• Will have competitors who tackle the same problems (2020).
• Demand for blockchain-based synthetic assets is still relatively small. "As it currently stands, the assets being represented on the platform are ones which are relatively easy to acquire through traditional mediums such as secondary exchanges like Binance."
• From DeFi Weekly (11-3-2020):

"However this is where I realise that Synthetix's model isn't really sustainable in the long run unless they manage to overcome some really hard challenges.

1. As noted earlier on, Synthetic assets are kind of guaranteed to have the collateral they claim since there's no liquidations - only debt that needs to be repaid. The system faces potential under-collateralisation issues (although at 750% it's quite far away). Future SIPs propose to fix this issue although implementation is to be seen.
2. Holders of Synthetic assets are holding something that isn't exactly redeemable for stable collateral. Should the price of SNX start dropping rapidly, many positions start becoming undercollateralised and even if you could redeem SNX it would be facing a bank run of sorts.
3. Due to staking incentives, only 20% of SNX supply is not actively being staked which begs the question that how will organic, healthy liquidity originate elsewhere if most of it is being sucked up? Remember: you actually need healthy demand for SNX outside of an incentive mechanisms for the synthetic assets to have true value."

• Has had problems with front running (13-2-2020). From Bankless (13-5-2020):

"In the case of Synthetix, front-runners manipulated the price of an asset on the spot market and then traded it on sX before the oracle updated the price, effectively creating significant arbitrage opportunities at the cost of SNX stakers. Ultimately, the front-running attacks plagued the Synthetix network creating a disproportionate amount of earnings for the derivatives protocol. Fortunately, the front-running issues have largely been subdued and Synthetix back on track for reporting accurate earnings."

• Kain has been open about having had a burn out, but due to coordination issues within the core contributors, has run for the Spartan Council (6-2021).

Competitors

• From Token Tuesdays (3-9-2019:

"Market Protocol and FOTA are the first projects that come to mind, each with slightly different variations on services offered and how their respective tokens play into their ecosystem."

• UMA and Abra

Team, Funding, partners, etc.

Team

• Full team can be viewed here (5-2-2021).
• Kain Warwick; founder, is friends with EthHub
• Jordan Momtazi; "has been a core member of the Synthetix team from day one"
• Justin Moses; CTO (5-5-2020)
• Adam Cochran; contributor (15-11-2022).
• HasGauntlet as some of their professional delegates (30-11-2022).

Funding

• Invested in by SVK Crypto
• "At inception, Havven raised $250k in a seed round supplemented by a larger $30M ICO round priced at a reported base rate of $0.67/SNX. Lead by Synapse Capital"
• From The Block (29-10-2019)

"Has raised around $3.8 million in new funding. Announcing the news on Monday, Synthetix said Framework Ventures has purchased 5 million Synth (SNX) tokens from the Synthetix Foundation’s treasury, toward the funding."

• Is one of the funders (18-10-2020) of Gitcoin Grant round 7 (and possibly continues to do so).
• From Cointelegraph (14-2-2021):

"Announced a $12 million dollar fundraise led by venture capital firms Paradigm, Coinbase Ventures, and IOSG. The funds purchased SNX tokens directly from the DAO treasury, and “will contribute where possible by providing liquidity in the form of SNX collateral, and also participate in its rapidly evolving community governance system,” the announcement reads." DeFi Prime goes further saying they "have joined Synthetix’s Spartan Council".

• Compound, Kraken, Lido, Synthetix, The Graph, and Uniswap have donated $250,000 each to support Ethereum execution-layer client teams (8-2021).

Partners

• From a commissioned Messari report (4-5-2023):

"Polynomial, formerly an options vault, launched a perps trading front end using Synthetix Perps in Q1. Mux, Nested, Unidex, and Conduit.lol are new Synthetix partners working on integrating Synthetix liquidity to their protocol solutions."

• Part of the DeFi Network.
• Uses Chainlink as an oracle.
• Partners with Groundhog, according to their website (21-4-2020).
• Synthetix, have partnered (6-5-2020) with Ethereum layer-2 research team Optimism to launch a demo deployment of Synthetix Exchange on the Optimistic Virtual Machine (OVM).
• Member (21-5-2020) of the Chicago DeFi Alliance (CDA).
• Announced that institutional liquidity providers such as DTC Capital, Three Arrows Capital and ParaFi have joined the platform. (23-7-2020)
• Is part of the Global DeFi Alliance, created by Huobi (15-9-2020).
• Is mentioned as a protocol that will work with Skale (10-8-2020).
• Is a founding member of Asia DeFi Network (ADN) according to the website (13-7-2021).

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