CavalierWhere Synthetix v3 could take us
While banks have been falling apart, and feds cranked the money printers, Synthetix has been building. The beauty of a bear market is that the noise dies down, shillers vacate, and the sustainable protocols emerge from the haze of hype. Through the price cascades and blatant fraud of recent months, actual defi performed as intended, and the CeFi pretenders exploded. Endless speculation and guessing chased FTX and the related fallout, while the blue chip defi protocols systematically processed...
Cavalier$500m is waiting for you to #BuildOnSynthetix
People think they know Synthetix, and they kind of do - but that was v2, and no developers in their right mind would build anything for Synthetix v2. Thankfully, v3 is here and its different enough to require fresh thinking, and more blog posts. v3 is a totally different beast, not a marginal upgrade. New architecture, new premise and a fundamentally new offering: the liquidity layer for defi. Markets rely on liquidity, and without it they suffer from the cold-start problem – not enough liqui...
CavalierA Perp in the road
Synthetix could be at a fork in the road, between leaning into a platform model (the liquidity layer helping scale a range of protocols), or a product (full stack onchain perps). Or has the market already guided us? Synthetix has been through many iterations and permutations; including a stablecoin, synths, delayed swaps, atomic swaps, and then found perps where it sparked a new era of on-chain decentralized trading, and over $50b in volume so far. Synthetix v3 was envisioned as the generaliz...
Synthetic stories
CavalierWhere Synthetix v3 could take us
While banks have been falling apart, and feds cranked the money printers, Synthetix has been building. The beauty of a bear market is that the noise dies down, shillers vacate, and the sustainable protocols emerge from the haze of hype. Through the price cascades and blatant fraud of recent months, actual defi performed as intended, and the CeFi pretenders exploded. Endless speculation and guessing chased FTX and the related fallout, while the blue chip defi protocols systematically processed...
Cavalier$500m is waiting for you to #BuildOnSynthetix
People think they know Synthetix, and they kind of do - but that was v2, and no developers in their right mind would build anything for Synthetix v2. Thankfully, v3 is here and its different enough to require fresh thinking, and more blog posts. v3 is a totally different beast, not a marginal upgrade. New architecture, new premise and a fundamentally new offering: the liquidity layer for defi. Markets rely on liquidity, and without it they suffer from the cold-start problem – not enough liqui...
CavalierA Perp in the road
Synthetix could be at a fork in the road, between leaning into a platform model (the liquidity layer helping scale a range of protocols), or a product (full stack onchain perps). Or has the market already guided us? Synthetix has been through many iterations and permutations; including a stablecoin, synths, delayed swaps, atomic swaps, and then found perps where it sparked a new era of on-chain decentralized trading, and over $50b in volume so far. Synthetix v3 was envisioned as the generaliz...
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Synthetic stories
As an upgradable protocol run by brainiacs, Synthetix has had the tendency to build from where it currently is, rather than working backwards from a clear future vision. For Synthetix to become an enduring defi primitive and outlast us all, we need to step back and decide where we’re going. The advanced state of Synthetix V3 means we have choice on how and where we deploy our liquidity and markets in the best interest of the protocol. More than ever, we are faced with decisions that deserve consideration in light of a future state.
A fork in the road lays out bold experiments, that we should indeed run to test some of the most important choices faced by the protocol. Read that post first to best understand this one.
Shifting to a model of isolated deployments may seem antithetical to the goal of a liquidity layer, but thats how the theory-land of discord meets real users, to understand the ideal configuration of Synthetix. So that we can best execute and evaluate these experiments, let's characterise what a terminal state of Synthetix could look like:
Large collateral value, possibly of non-SNX assets and arranged into different Pools
Multiple derivative markets, collateralized by multiple Pools
Multichain availability; liquidity on multiple chains, including on appchains
SNX token accruing value; supreme governance power and earning fees from all collateral and chains
Onchain governace; tokenholders electors governoors, who approve protocol code changes
Our strategy is perps-powered chain expansion. Perps V2 has produced over $30b in volume and $20m in revenue, so we built Perps V3 and a Perp for L1. Now we are going to find more traders and integration partners. V3 Core is the collateral engine that we pair with Perps V3, and deploy it to different chains - some might call it land and expand, or chain and gain. Coming to a chain near you, with collateral you're used to; see your Spartan Councillor if low yields persist. Put another way, perps is the trader product and star of the show, and the collateral engine underneath is what attracts LPs. Andromeda is the first example of this bundle of innovation, that we'll explore further below.
Knowing directionally what we are aiming for, we can use isolated chain deployments to test key variables of protocol configuration:
chain deployments; deploy to new chains in isolated, reversible ways
collateral types; test new collateral like ETH and USDC in isolated deployments
new Markets; deploy Perps V3, and L1 Perp, and encourage the ecosystem to build new Markets
SNX revenue models; test buyback and burn as a mechanism to accrue value to the token
Governance will mature as the final chain configuration becomes clearer
Below we go into more detail about some of the important considerations
Andromeda is the V3 Core + Perps + ETH + USDC. Get used to this name cos its going to be dropping on a chain near you. Think of it as a bundle of the most advanced defi primitives, ready to earn yield for LPs and trade big for degens. Andromeda combines V3 Core for LPs, with the Perps V3 Market for traders, and enabled both ETH and USDC as collateral. Once Andromeda on a chain proves successful, governance can consider allowing integration partners on that chain to create Pools and Markets.
Synthetix V3 is a derivatives liquidity layer, so needs to meet the protocols where they are, providing liquidity to markets and chains - including app chains. The trend of protocols launching appchains is understandable, and so Synthetix needs to consider deploying and connecting to appchains - which requires the right architecture and bridges. To be explored in another post, Synthetix should consider our own appchain and its associated benefits; which include limiting the scale and rollout of changes and contract employments, increasing security for our upgradeable system.
Synthetix needs to be an attractive place to LP, and needs lots of it. This means experimenting with non-SNX collateral, to see how the real world reacts to the yield and risks Synthetix can offer on popular assets like USDC and ETH. Once these experiments are run, SNX either remains the sole collateral, or governs over and earns fees from all collateral - massively increasing the capacity and capability of Synthetix as a platform. An additional benefit of non-SNX collateral is the significantly increased range of integration partners. Yes there are risks associated with some collateral types, but the protocol is in a position to experiment with different collateral, in an isolated and constrained way. Importantly this experimental approach holds off on cross-chain liquidity until its clearer which deployments are working, and the governance mothership is decided.
Perps V2 found some product market fit, earning substantial revenues both with and without incentives. More than $30B in volume, and $20m in revenue later, Perps V3 is on testnet and a release is getting closer. The learnings from Perps V2 and V3 have been combined into a dedicated L1 Perp. With both of these Markets getting closer to release, its crucial that we deploy them to where they can be put to best use. Perps V3 to the trader chains, and L1 Perp for the whales and ultimate stable coin.
Synthetix is destined to be multi chain and provide liquidity across layers, and at some point we need to decide on an architecture that works. A future that incudes lots of Markets, chains, and tokens gets messy very quickly, unless there’s central settlement and governance. Eventually Synthetix will need to choose one of these, so any experiments should keep these end states in mind:
the existing Ethereum and optimism app that acts as the mothership, and connects to many other chains, or
an app chain to aggregate, settle and earn revenue from all of the disparate chains (alternative collateral could live on multiple chains)
sUSD is an integral part of Synthetix and that won't be changing. As we deploy these experiments, the sUSD on each chain will stay isolated, so that collateral and markets on one chain, for now, don't have any affect on the sUSD on Optimism and Ethereum. The sUSD from Synthetix V2 is separate to the sUSD from V3 - which currently has limited circulation due to V3 being in mainnet Alpha.
If we have indeed built something people want, deploying V3 + Markets into new chains will result in real usage and earn fees. In the spirit of experimentation and keeping deployments silod, fees in the short term can be used to buyback and burn SNX. This accrues value to SNX for all token holders, and has the advantage of simple technical implementation. Once experiments have been run, the ideal chains have been identified, and an architecture decision has been made, fees would be able to stream back to the mothership chain. This may be the existing ETH/OP deployment, or our own SnackChain.
Andromeda on Base
If fails -> wind down, go to 2.
If successful -> go to 2.
Andromeda to Optimism
If fails -> migrate SNX as collateral from V2 to V3, L1 and Optimism becomes mothership
If successful -> go to 3.
Deploy Synthetix Chain and migrate SNX there to create the mothership
In parallel, and non-blocking:
Carina on L1
Andromeda on Arbitrum
If fails -> wind down
If successful -> connect to mothership
Following in the vein of Kains post, I propose bring Perps V3 to Lyrachain, so the Lyra V2 can use Perps V3 for hedging. Lyrachain hasn't launched yet, but when it does, we should bring them back into the family of berry-free perps.
Its fair to say that given the success we have had with Perps V2, that this new strategy is Perp-focussed. Given that collateral (SNX) and usage (via Perps V2) is still on Synthetix V2, the proposed framework has a few implications on existing plans.
No short term need to migrate SNX from V2 to V3 on ETH/OP, we have enough collateral in Andromeda deployments (ETH and USDC) and want to compare the demand between the two, and as its possible the SNX will be migrated to an Appchain in the future.
No short term need to rename V2 and V3 synths for now - V2 to V3 migration plan is drafted
No change to the existing governance proposals for Kwenta, Betswirl and Thales. Andromeda coming to Optimism would simply expand the collateral types available.
Andromeda coming to Optimism would mean that existing SNX collateral could be capped, and wound down naturally. The native stablecoin would not need to change.
Cross-chain liquidity is not on the critical path, but cross-chain governance is.
Team Andromeda is working to deploy to Base as soon as Perps V3 is ready for mainnet, and governance decides on system parameters. This is the most impactful next step the protocol can take, and begins the experiments Kain outlined.
Alongside the individual Andromeda releases onto new chains, we can think about these upcoming milestones:
V3 public release: V3 Core on Base will be the first public mainnet release inviting capital, with appropriate caps
New Perps: Perps V3 market is in Testnet and being refined, deployed to Base first as experiment.
New LP Interfaces: Simplified LP interfaces, along with LP vaults, to make it easier than ever to LP for V3
New SDK: Trade and use the contracts via the Synthetix SDK
New Pools: New Pools to LP into (Innovation Pool, Thales, Betswirl), with new Markets to back (Betswirl, Thales)
An L1 Perp: L1 Perp is in audit and coming to a stablecoin issuer near you
More oracles: We've adopted a source agnostic Oracle Manager, and implemented ERC 7412 to standardize cross chain and offchain requests
And some final steps on our path to becoming unstoppable:
Launch IPFS app for LPs to remove the reliance on centralized web hosting
Define V3GM (its been a while), launch Election Module, and then Safe Module
V3 Markets and Pools are currently permissioned, but can be made permissionless as the ecosystem matures
As an upgradable protocol run by brainiacs, Synthetix has had the tendency to build from where it currently is, rather than working backwards from a clear future vision. For Synthetix to become an enduring defi primitive and outlast us all, we need to step back and decide where we’re going. The advanced state of Synthetix V3 means we have choice on how and where we deploy our liquidity and markets in the best interest of the protocol. More than ever, we are faced with decisions that deserve consideration in light of a future state.
A fork in the road lays out bold experiments, that we should indeed run to test some of the most important choices faced by the protocol. Read that post first to best understand this one.
Shifting to a model of isolated deployments may seem antithetical to the goal of a liquidity layer, but thats how the theory-land of discord meets real users, to understand the ideal configuration of Synthetix. So that we can best execute and evaluate these experiments, let's characterise what a terminal state of Synthetix could look like:
Large collateral value, possibly of non-SNX assets and arranged into different Pools
Multiple derivative markets, collateralized by multiple Pools
Multichain availability; liquidity on multiple chains, including on appchains
SNX token accruing value; supreme governance power and earning fees from all collateral and chains
Onchain governace; tokenholders electors governoors, who approve protocol code changes
Our strategy is perps-powered chain expansion. Perps V2 has produced over $30b in volume and $20m in revenue, so we built Perps V3 and a Perp for L1. Now we are going to find more traders and integration partners. V3 Core is the collateral engine that we pair with Perps V3, and deploy it to different chains - some might call it land and expand, or chain and gain. Coming to a chain near you, with collateral you're used to; see your Spartan Councillor if low yields persist. Put another way, perps is the trader product and star of the show, and the collateral engine underneath is what attracts LPs. Andromeda is the first example of this bundle of innovation, that we'll explore further below.
Knowing directionally what we are aiming for, we can use isolated chain deployments to test key variables of protocol configuration:
chain deployments; deploy to new chains in isolated, reversible ways
collateral types; test new collateral like ETH and USDC in isolated deployments
new Markets; deploy Perps V3, and L1 Perp, and encourage the ecosystem to build new Markets
SNX revenue models; test buyback and burn as a mechanism to accrue value to the token
Governance will mature as the final chain configuration becomes clearer
Below we go into more detail about some of the important considerations
Andromeda is the V3 Core + Perps + ETH + USDC. Get used to this name cos its going to be dropping on a chain near you. Think of it as a bundle of the most advanced defi primitives, ready to earn yield for LPs and trade big for degens. Andromeda combines V3 Core for LPs, with the Perps V3 Market for traders, and enabled both ETH and USDC as collateral. Once Andromeda on a chain proves successful, governance can consider allowing integration partners on that chain to create Pools and Markets.
Synthetix V3 is a derivatives liquidity layer, so needs to meet the protocols where they are, providing liquidity to markets and chains - including app chains. The trend of protocols launching appchains is understandable, and so Synthetix needs to consider deploying and connecting to appchains - which requires the right architecture and bridges. To be explored in another post, Synthetix should consider our own appchain and its associated benefits; which include limiting the scale and rollout of changes and contract employments, increasing security for our upgradeable system.
Synthetix needs to be an attractive place to LP, and needs lots of it. This means experimenting with non-SNX collateral, to see how the real world reacts to the yield and risks Synthetix can offer on popular assets like USDC and ETH. Once these experiments are run, SNX either remains the sole collateral, or governs over and earns fees from all collateral - massively increasing the capacity and capability of Synthetix as a platform. An additional benefit of non-SNX collateral is the significantly increased range of integration partners. Yes there are risks associated with some collateral types, but the protocol is in a position to experiment with different collateral, in an isolated and constrained way. Importantly this experimental approach holds off on cross-chain liquidity until its clearer which deployments are working, and the governance mothership is decided.
Perps V2 found some product market fit, earning substantial revenues both with and without incentives. More than $30B in volume, and $20m in revenue later, Perps V3 is on testnet and a release is getting closer. The learnings from Perps V2 and V3 have been combined into a dedicated L1 Perp. With both of these Markets getting closer to release, its crucial that we deploy them to where they can be put to best use. Perps V3 to the trader chains, and L1 Perp for the whales and ultimate stable coin.
Synthetix is destined to be multi chain and provide liquidity across layers, and at some point we need to decide on an architecture that works. A future that incudes lots of Markets, chains, and tokens gets messy very quickly, unless there’s central settlement and governance. Eventually Synthetix will need to choose one of these, so any experiments should keep these end states in mind:
the existing Ethereum and optimism app that acts as the mothership, and connects to many other chains, or
an app chain to aggregate, settle and earn revenue from all of the disparate chains (alternative collateral could live on multiple chains)
sUSD is an integral part of Synthetix and that won't be changing. As we deploy these experiments, the sUSD on each chain will stay isolated, so that collateral and markets on one chain, for now, don't have any affect on the sUSD on Optimism and Ethereum. The sUSD from Synthetix V2 is separate to the sUSD from V3 - which currently has limited circulation due to V3 being in mainnet Alpha.
If we have indeed built something people want, deploying V3 + Markets into new chains will result in real usage and earn fees. In the spirit of experimentation and keeping deployments silod, fees in the short term can be used to buyback and burn SNX. This accrues value to SNX for all token holders, and has the advantage of simple technical implementation. Once experiments have been run, the ideal chains have been identified, and an architecture decision has been made, fees would be able to stream back to the mothership chain. This may be the existing ETH/OP deployment, or our own SnackChain.
Andromeda on Base
If fails -> wind down, go to 2.
If successful -> go to 2.
Andromeda to Optimism
If fails -> migrate SNX as collateral from V2 to V3, L1 and Optimism becomes mothership
If successful -> go to 3.
Deploy Synthetix Chain and migrate SNX there to create the mothership
In parallel, and non-blocking:
Carina on L1
Andromeda on Arbitrum
If fails -> wind down
If successful -> connect to mothership
Following in the vein of Kains post, I propose bring Perps V3 to Lyrachain, so the Lyra V2 can use Perps V3 for hedging. Lyrachain hasn't launched yet, but when it does, we should bring them back into the family of berry-free perps.
Its fair to say that given the success we have had with Perps V2, that this new strategy is Perp-focussed. Given that collateral (SNX) and usage (via Perps V2) is still on Synthetix V2, the proposed framework has a few implications on existing plans.
No short term need to migrate SNX from V2 to V3 on ETH/OP, we have enough collateral in Andromeda deployments (ETH and USDC) and want to compare the demand between the two, and as its possible the SNX will be migrated to an Appchain in the future.
No short term need to rename V2 and V3 synths for now - V2 to V3 migration plan is drafted
No change to the existing governance proposals for Kwenta, Betswirl and Thales. Andromeda coming to Optimism would simply expand the collateral types available.
Andromeda coming to Optimism would mean that existing SNX collateral could be capped, and wound down naturally. The native stablecoin would not need to change.
Cross-chain liquidity is not on the critical path, but cross-chain governance is.
Team Andromeda is working to deploy to Base as soon as Perps V3 is ready for mainnet, and governance decides on system parameters. This is the most impactful next step the protocol can take, and begins the experiments Kain outlined.
Alongside the individual Andromeda releases onto new chains, we can think about these upcoming milestones:
V3 public release: V3 Core on Base will be the first public mainnet release inviting capital, with appropriate caps
New Perps: Perps V3 market is in Testnet and being refined, deployed to Base first as experiment.
New LP Interfaces: Simplified LP interfaces, along with LP vaults, to make it easier than ever to LP for V3
New SDK: Trade and use the contracts via the Synthetix SDK
New Pools: New Pools to LP into (Innovation Pool, Thales, Betswirl), with new Markets to back (Betswirl, Thales)
An L1 Perp: L1 Perp is in audit and coming to a stablecoin issuer near you
More oracles: We've adopted a source agnostic Oracle Manager, and implemented ERC 7412 to standardize cross chain and offchain requests
And some final steps on our path to becoming unstoppable:
Launch IPFS app for LPs to remove the reliance on centralized web hosting
Define V3GM (its been a while), launch Election Module, and then Safe Module
V3 Markets and Pools are currently permissioned, but can be made permissionless as the ecosystem matures
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