Synthetix (SNX): A Safer 4X in Next Couple of Months!
---Kwenta Testnet Takeaways, Next-Price Orders, SIP 80 and 184, and Synthetix Bottom Line---
The following is taken directly from the Synthetix io Blog update, dated 1 December 2021 and titled, "Futures Update." These are only excerpts and you would be well served to read the entire blog update.
Kwenta Testnet Takeaways: "Much progress has been made and numerous lessons learned, culminating in a Kwenta testnet competition held in October. Overall, the testnet competition was a great success. The futures market functioned as intended, and also highlighted some opportunities to enhance the usability and efficiency of the platform without adding too much additional scope. One of the takeaways was that frontrunning still poses a legitimate risk on L2 if Synthetix is going to offer low fees for perpetual futures. This prompted the introduction of SIP-184, which dynamically adjusts exchange fees in response to price instability. With SIP-184 as a backstop against volatility, base exchange fees can be safely lowered. Research done as part of SIP-184 suggests that ~20bp exchange fees could be feasible, with the dynamic fee only kicking in ~1% of the time. Note that this is just an initial target, and further improvements are likely to support even lower exchange fees."
Next-Price Orders: "First and foremost, the transition to L2 has greatly improved the frontrunning situation for Synthetix. The scalability offered by Optimistic Ethereum enables Chainlink oracles to push updates much more frequently in a cost-effective way, thus allowing for spot synth exchanges with no fee reclamation and negligible frontrunning risk (with 40bp fees). The other main differentiator of Synthetix perpetual futures compared to other platforms is the role of funding payments. Traditionally, funding payments are used to align the futures market price with the spot price. Because trades on Synthetix are executed at the current oracle price, there is no need for such a mechanism. Instead, the funding rate is used to encourage balanced open interest and minimize directional risk incurred by SNX stakers. This brings us to next-price orders which, as the name suggests, are trades that execute at whatever price is reported in the next oracle update after a trade is placed. Because orders fulfilled at the next price update are inherently difficult or impossible to frontrun, they can be filled with an extremely low exchange fee and minimal or no risk of frontrunning. Note that next-price orders will exist in parallel with traditional atomic exchanges, and that atomic exchanges with a slightly higher fee will always be offered. The target user for next-price orders is predominantly arbitrage traders who will neutralize market skew to earn the funding rate (there will not be a UI for next-price orders initially). With lower exchange fees, these traders will be able to more efficiently neutralize even relatively small imbalances between long and short open interest. This will greatly reduce market risk passed onto stakers while also broadly lowering funding payments made by other traders on the platform. It is also expected that usage of next-price orders will decline over time as fees for atomic exchanges approach parity with next-price orders."
SIPs: "These two additions (SIP-184 and next-price orders) are relatively minor compared to the rest of the futures scope (outlined in SIP-80), but offer extremely significant benefits to users. Thus, the tradeoff of incorporating them in exchange for a slightly later launch date is well worth the effort. Currently, SIP-80 and SIP-184 are both code complete and under audit. The additional logic for next-price orders is in progress and close to being finalized. The next steps from there are testing SIP-184 on testnet (this week) to push fees as low as possible, then getting ready for mainnet with a target launch date in mid-January. The mainnet launch will be rolled out in several stages, gradually expanding maximum open interest caps as the effectiveness of the underlying mechanisms are validated."
BOTTOM LINE: "It’s been a long journey, but the light at the end of the tunnel is now clearly visible. In a little over a month, Synthetix will deliver a fully on-chain composable perpetual futures market on the highly performant Optimistic Ethereum layer 2, with top tier UX and unparalleled liquidity. While it would have been ideal to launch futures before the end of the year, more sUSD liquidity is still needed on Optimistic Ethereum and by the time mainnet launches there should be a significantly higher amount of SNX staked on L2 reducing the risk for everyone staking on L2. With the upcoming Debt Pool Synthesis, we will also have much more sUSD liquidity to leverage for futures traders."
Hopefully, this isn't too much to take in. There was actually a little more in their update, but it is good that they are keeping us SNX hodlers informed. My (Garry, not Synthetix Blog) only additional thought is, at today's cheap pricing, SNX is one helluva deal for the project/platform. In my mind, I am positive we will see SNX shoot past its previous highs seen earlier this year based solely on a quality product/project. This isn't your nephew's favorite meme speculation waiting on a tweet to make you rich. When SNX retakes and surpasses its old highs, it will not fall near as easily as that next Dog coin. This a much safer 4x in my mind in the next couple of months!!!
On a side note, I am increasing my SNX token count every Monday, earning additional tokens at 13.99% APY without the hassle of having to stake, validate or delegate my tokens. I just earned over 7 SNX yesterday, just like the week before and just like I will next Monday! If you want to do the same, I can give you my referral code to earn us both $50 worth of BTC if you do. TradingView does not want me advertising the exchange or my referral code here, but you can contact me if you want that info.
The following is taken directly from the Synthetix io Blog update, dated 1 December 2021 and titled, "Futures Update." These are only excerpts and you would be well served to read the entire blog update.
Kwenta Testnet Takeaways: "Much progress has been made and numerous lessons learned, culminating in a Kwenta testnet competition held in October. Overall, the testnet competition was a great success. The futures market functioned as intended, and also highlighted some opportunities to enhance the usability and efficiency of the platform without adding too much additional scope. One of the takeaways was that frontrunning still poses a legitimate risk on L2 if Synthetix is going to offer low fees for perpetual futures. This prompted the introduction of SIP-184, which dynamically adjusts exchange fees in response to price instability. With SIP-184 as a backstop against volatility, base exchange fees can be safely lowered. Research done as part of SIP-184 suggests that ~20bp exchange fees could be feasible, with the dynamic fee only kicking in ~1% of the time. Note that this is just an initial target, and further improvements are likely to support even lower exchange fees."
Next-Price Orders: "First and foremost, the transition to L2 has greatly improved the frontrunning situation for Synthetix. The scalability offered by Optimistic Ethereum enables Chainlink oracles to push updates much more frequently in a cost-effective way, thus allowing for spot synth exchanges with no fee reclamation and negligible frontrunning risk (with 40bp fees). The other main differentiator of Synthetix perpetual futures compared to other platforms is the role of funding payments. Traditionally, funding payments are used to align the futures market price with the spot price. Because trades on Synthetix are executed at the current oracle price, there is no need for such a mechanism. Instead, the funding rate is used to encourage balanced open interest and minimize directional risk incurred by SNX stakers. This brings us to next-price orders which, as the name suggests, are trades that execute at whatever price is reported in the next oracle update after a trade is placed. Because orders fulfilled at the next price update are inherently difficult or impossible to frontrun, they can be filled with an extremely low exchange fee and minimal or no risk of frontrunning. Note that next-price orders will exist in parallel with traditional atomic exchanges, and that atomic exchanges with a slightly higher fee will always be offered. The target user for next-price orders is predominantly arbitrage traders who will neutralize market skew to earn the funding rate (there will not be a UI for next-price orders initially). With lower exchange fees, these traders will be able to more efficiently neutralize even relatively small imbalances between long and short open interest. This will greatly reduce market risk passed onto stakers while also broadly lowering funding payments made by other traders on the platform. It is also expected that usage of next-price orders will decline over time as fees for atomic exchanges approach parity with next-price orders."
SIPs: "These two additions (SIP-184 and next-price orders) are relatively minor compared to the rest of the futures scope (outlined in SIP-80), but offer extremely significant benefits to users. Thus, the tradeoff of incorporating them in exchange for a slightly later launch date is well worth the effort. Currently, SIP-80 and SIP-184 are both code complete and under audit. The additional logic for next-price orders is in progress and close to being finalized. The next steps from there are testing SIP-184 on testnet (this week) to push fees as low as possible, then getting ready for mainnet with a target launch date in mid-January. The mainnet launch will be rolled out in several stages, gradually expanding maximum open interest caps as the effectiveness of the underlying mechanisms are validated."
BOTTOM LINE: "It’s been a long journey, but the light at the end of the tunnel is now clearly visible. In a little over a month, Synthetix will deliver a fully on-chain composable perpetual futures market on the highly performant Optimistic Ethereum layer 2, with top tier UX and unparalleled liquidity. While it would have been ideal to launch futures before the end of the year, more sUSD liquidity is still needed on Optimistic Ethereum and by the time mainnet launches there should be a significantly higher amount of SNX staked on L2 reducing the risk for everyone staking on L2. With the upcoming Debt Pool Synthesis, we will also have much more sUSD liquidity to leverage for futures traders."
Hopefully, this isn't too much to take in. There was actually a little more in their update, but it is good that they are keeping us SNX hodlers informed. My (Garry, not Synthetix Blog) only additional thought is, at today's cheap pricing, SNX is one helluva deal for the project/platform. In my mind, I am positive we will see SNX shoot past its previous highs seen earlier this year based solely on a quality product/project. This isn't your nephew's favorite meme speculation waiting on a tweet to make you rich. When SNX retakes and surpasses its old highs, it will not fall near as easily as that next Dog coin. This a much safer 4x in my mind in the next couple of months!!!
On a side note, I am increasing my SNX token count every Monday, earning additional tokens at 13.99% APY without the hassle of having to stake, validate or delegate my tokens. I just earned over 7 SNX yesterday, just like the week before and just like I will next Monday! If you want to do the same, I can give you my referral code to earn us both $50 worth of BTC if you do. TradingView does not want me advertising the exchange or my referral code here, but you can contact me if you want that info.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.