May 22, 2024
The following article contains a recap of news, projects, and important updates from the Spartan Council, Core Contributors, and Ambassador Council from the past week.
👉TLDR
- Discussion on the Spartan Council anchoring to sUSD: Gene pointed out that it had fallen as low as $0.97, Kaleb proposed a solution to bring the price back towards $1, which would change the SNX buyback and burn to sUSD buyback and burn it instead. More soon.
- Deployment of the V3 migration: see below for a summary of details
- SIP-383: Support for multi-collateral margins — Perps V3 summary of the presentation
- SNX incentive program for persons transacting based on: see below for a summary of details — the program it starts today!
- Ambassador Council Update: The team onboarded new members (dsacks), discussed future Spartan Spaces and prepared for Optimism's next round of retroactive funding.
Spartan Council and SIP Updates
Present during the Spartan Council weekly project sync on May 15, 2024:
Spartan advice: Afif, Cavalier, Jackson, Millie, ml_sudo, Snax Frens, snxmaximalists
Main contributors: Ana, Kaleb, Mike, Noah, Steve, Troy
The Spartan Council had a discussion last week regarding sUSD's current peg on optimism, with Gene raising concerns that it recently fell to $0.97.
Kaleb proposed a potential solution that would change the SNX buyback and burn to sUSD buyback and burn instead. This would effectively reduce the supply of sUSD, bringing the price back towards $1. However, $6-10 million would be needed in buying/burning sUSD to achieve this. Another possible solution would be to introduce a native interest rate on sUSD once the migration to V3 is complete. More to come here.
And speaking of Migration V3A blog post was recently released and reviews some details of this crucial phase of the V3 rollout. Here are the highlights:
Accelerate real output
- V3 moves away from incentivizing through inflationary minting participation and focuses on 1) generating yield from trading fees and distributing to LPs, and 2) introducing a buyback and burn mechanism to prevent SNX from circulating through the purchase of trading fees.
Extension of the sUSD guarantee
- With V3, sUSD will be backed by a range of collateral assets, rather than the V2X system where sUSD was only collateralized against the native SNX token.
- These additional assets include SNX, ETH, USDC, yield-generating collateral (stataUSDC), and other governance-approved tokens.
- This expansion of collateral options will contribute to the scalability of the sUSD stablecoin in V3.
Facilitate migration to V3
Certain migration support measures will begin this week:
1. Increased OP incentives for sUSD liquidity on Vélodrome (Optimism): Incentives will be increased to 10,000 OP tokens per week.
2. SNX Incentives for sUSD Liquidity on Curve (Ethereum Mainnet): Synthetix will introduce 20,000 SNX tokens per week as incentives for LPs in the sUSD/USDC/DAI/USDT pool on Ethereum Mainnet.
Migration plan and mechanisms
Will begin in June and will take place in 2 phases:
1. Ethereum mainnet migration: SNX stakeholders will be able to migrate their positions to V3 in June.
2. Optimism Migration: After the Ethereum Mainnet migration, Synthetix V3 will be deployed on Optimism and the migration process will extend to Optimism SNX stakeholders.
The V3 migration will further push Synthetix in the direction of creating a robust decentralized ecosystem of derivatives protocols on Synthetix's liquidity and infrastructure, while allowing builders, traders and liquidity providers to scale derivatives in chain.
There was also a SIP presentation last week: SIP-383 to add support for multi-collateral margins to Perps V3, which was introduced by Kaleb. He explained that instead of only having sUSDC as trading margin, users could deposit wrapped ETH or BTC and receive snxETH and snxBTC to use as trading margin. In addition to a feature upgrade that improves the user experience, this addition will allow the opening of delta neutral positions for traders interested in increasing the funding rate.
However, the introduction of new types of margin guarantees do add a step for LPs during liquidations. Currently, since LP collateral and trade margin are both sUSDC, LPs receive a portion of the sUSDC margin as reward during liquidations, which can be added to their LP position. Since snxETH and snxBTC will not be supported by LP collateral, LPs will be responsible for unwrapping these liquidation rewards. This approach was decided in favor of the exchange of collateral during liquidation Before to distribute rewards due to the risk involved (systematic exchanges of tokens would introduce the possibility of sandwich attacks).
Since the value of these additional margin collaterals is not constant (as is the case for stablecoins), a discount rate will be applied that limits the amount of deposit that can be used as trading collateral. This discount rate will be set based on the expected price impact for LPs, who will then need to unwrap and sell their non-sUSDC staking rewards. There are a number of configurable governance variables that would allow the Spartan Council to limit LP risk. The introduction of non-stable margin also introduces the possibility of liquidation without any open positions if the value of this margin falls significantly.
Next, Synthetix announced the launch of an SNX incentive program for trading on Base, which begins today May 22!
For more details, see the blog post here, but in short: Synthetix Treasury will allocate up to 500,000 SNX for fee reductions on perps markets and 90% of fees paid up to the weekly cap of 50,000 SNX. The first rewards period will run until May 28, with the initial distribution of SNX rewards calculated based on this period and distributed within 24-48 hours after May 28. The current incentive budget allows for a minimum of 10 full weeks of 90% reduced fees. The goal of this program is to onboard new traders, generate fees and attract new liquidity providers to support trading Synthetix Perps V3 on Base.
Council of Ambassadors
Present at the meeting of the Council of Ambassadors on May 15, 2024:
Ambassadors: dsacks, GUNBOAT, Mastermojo, Matt, Westie
Finally, in the Ambassador updates, the team added its new Council member: dsacks! They tackled new tasks with him, while also discussing future Spartan Spaces and Optimism's next round of retroactive funding. The Council reached out to all protocols in the SNX ecosystem and communicated with Season 5 OP grant applicants for feedback.
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SIP/SCCP status monitoring:
SIP-306: Migration V3, Status: approved
SIP-383: Support for multi-collateral margins — Perps V3, Status: vote pending