A dive into the Synthetix Ecosystem on Optimism
This blog dives into the Synthetix Ecosystem on Optimism with protocols such Lyra, Kwenta, Dhedge, Aelin, Polynomial, and more!
Interested in contributing as a community member? Reach out to Mike or Matt via SNX's Discord.
Alright Spartans (and future Spartans) alot has been happening at Synthetix this year. If you want to play catch up then you need to checkout this blog Synthetix recently released:
You now understand that Perps V2 and Synthetix V3 is coming! These new updates are going to kick protocol fee generation into OVERDRIVE while improving the code and user experience! Making Synthetix the GOLD standard for revenue sharing tokens!
Lets slow down for a minute, and learn about why Synthetix chose Optimism in the first place. Ethereum’s high gas fees make trading synths on Synthetix expensive and compress $SNX staking returns. Creating, redeeming, and trading synths are all complex transactions, so Synthetix is a gas guzzler. This is why Synthetix chose to deploy its staking code on Optimism January 2021.
The reduction in gas fees on Optimism has created a huge flywheel effect for Synthetix and its stakers. Many articles have been put out for how to stake $SNX, and its benefits to stakers, but this is the best one:
In Summary if you stake SNX you get two kinds of rewards you can claim each week: sUSD fees generated from traders (fees collected from Kwenta Futures, Lyra, Kwenta Spot, atomic swaps, Polynomial, etc) and SNX inflationary rewards - current APY is 75%
With Optimism incentivizing new users to come to the ecosystem, massive onboarding is occurring. Synthetix and its ecosystem is looking ripe for huge growth and revenue generation!
OPtimism recently passed Arbitrum and sits at 1.1 Billion TVL. In 30 days TVL is up 282%. Follow the money…
Current protocols on Optimism are showing huge increases in TVL in the past 30 days. Synthetix is up 77% TVL in one month!
Analysts at Messari speculate OP will be a 9 billion marketcap so let that sink in on protocol TVL and revenue. This article can be found here:
Checkout this twitter thread to get the TLDR on what Synthetix is up to, and why protocol revenue is going to explode (Perps V2 and V3 baby!) for Synthetix over the coming months:
9,000,000 $OP tokens have been sent to Synthetix’s Treasury Council. They have just started distributing them out, with current incentives on Curve and Velodrome!
SIP-242 spells out a rough framework on what they plan to do with all the $OP!
Lets explore the current Synthetix ecosystem in Optimism, and a few other protocols that are great to have here:
Kwenta is a decentralized derivatives trading platform, live on Optimism, offering real-world and on-chain synthetic assets using the power of the Synthetix protocol.
Kwenta has two products it offers; Swaps and Futures (up to x25x leverage). Although Futures will be the flagship offering of Kwenta. Kwenta will support easy swaps of Synthetic assets similar to the likes of 1inch and uniswap. With the passage of KIP-21, Kwenta’s Synthswap can enable the exchange of any ERC20 tokens for any synths (and vice versa).
Despite being a Beta platform, Kwenta has reached $3.85 billion USD in trading volume through Organic use with no trading incentives.
$SNX Stakers have received $13.5 million in trading fees from Kwenta this year; checkout all the latest Futures analytics here:
What is coming to Kwenta? When Synthetix comes out with Perps V2 here soon it will significantly improve user experience with lower fees and more predictable funding rates, and increase open interest limits and support more markets! This will benefit anyone building ontop of Synthetix Perps - including Kwenta.
Kwenta has alot on the roadmap for 2nd half 2022:
What alot of traders have been waiting for is Advance Orders (stop loss, limit orders, etc) and Cross Margin! They are on the roadmap and will be delivered soon!
Kwenta is receiving 900,000 $OP tokens to onramp new users and incentivize trading. Here is a review of what they plan to do with them:
Lyra is an options automated market maker (AMM) that allows traders to buy and sell options on cryptocurrencies (currently $ETH and $BTC) against a pool of liquidity. The Lyra protocol has two key user groups, liquidity providers and options traders. Liquidity providers (LPs) deposit sUSD (a stablecoin) into one of the asset-specific Lyra Market Maker Vaults (MMVs). This liquidity is used to make two-sided (buy and sell) options markets for the asset that the vault specifies (e.g. ETH Market Maker Vault LPs quote options on ETH). LPs deposit liquidity to the vault to earn the fees paid when options are traded. Traders use Lyra to trade options. They can either buy options from or sell options to the MMV. Traders pay fees (in the form of the market-making spread) to LPs, as compensation for their liquidity.
Lyra uses the Synthetix Protocol in three different ways:
- As a settlement currency (All options are quoted, paid for, and settled with Synthetic USD or sUSD.)
- As collateral for calls (The AMM collateralizes the calls it sells with the relevant synth. For example, when the AMM sells an sETH call it will purchase 1 sETH from Synthetix. On expiry (or when the option is sold) the AMM will sell the sETH for sUSD and allow the option holder to settle.)
- For delta hedging (The protocol aims to keep the exposure of liquidity providers close to delta-neutral. It does this either by longing or short selling the underlying asset on Synthetix. For example, if the AMM is long 500 sETH deltas, it may short sell 500 sETH using Synthetix's short-selling functionality. )
Lyra upgraded the protocol recently to Avalon. Traders will now have access to:
- 100 strike/expiry combinations
- Partially collateralized options selling (3-4x improvements in yield)
- Be able to enter/exit the market maker vaults at any time
- Generate more fees thanks to partial collateralization
- Collect the lion’s share of liquidation fees generated on the protocol
Avalon centers around three big breakthroughs in the protocol:
- Anytime market-maker vault (MMV) entry/exit (LPs will now be able to deposit and withdraw funds from the market maker vault at any time)
- Rolling expiries out to 3 months
- Partial collateralization for options selling
Since the Avalon upgrade the AMM is performing beautifully even when $Eth was falling or rising.
What’s to come?
Lyra recently received their 3,000,000 $OP and now plans to SUPERCHARGE the protocol and RAMP up growth. Leap-26 was passed recently which spells out the framework on how Lyra plans to do this.
Currently you can take your Lyra and single stake it and receive $Lyra and $OP. Staking Lyra will also give you a boosting effect (up to 2x) to Market-Maker Vault rewards. MMV rewards are $Lyra and $OP tokens. For more info:
Traders will now be eligible for a rebate on fees paid for opening and closing trades in a blend of both LYRA and OP rewards. The fee rebate percentage will grow logarithmically up to a maximum of 50% based on how much LYRA the trader has staked. For the specifics check out LEAP-26 and if you’ve been waiting on the sidelines to stake or trade now is the time!
Make sure you stay up to date with Lyra with their community ran newsletter:
Polynomial automates financial derivative strategies to create products that deliver passive yield on various assets, and is built on top of Lyra. Currently, Polynomial has covered calls, put sell strategies on the platform. Through the use of a weekly automated covered call strategy, the vault generates a return on its deposits. In order to effectively compound the returns for depositors over time, the vault reinvests the yield gained back into the strategy. Vaults only accept synthetic assets (sUSD for put/call-selling vaults, sUSD for Gamma vault, and sETH for call selling Eth vault).
Polynomial recently upgraded the protocol to V2, where all vaults upgraded to the Lyra Avalon upgrade. This gives Polynomial instant deposits (within 1 hour), multiple strikes will be sold to reduce risk, partially collateralized vault, a short vol vault collateralized by sUSD, a basis trading vault using Synthetix Futures, and a gamma vault.
Polynomial recently had a community call where they gave an update on their OP token distribution, V2 launch, and updates on Gamma and Basis vault!
You can listen to this awesome call here:
The Gamma Vault runs a fully on-chain delta neutral strategy combing options and futures powered by Synthetix Futures and Lyra!
Thales is a decentralized protocol that allows users to take part in peer-to-peer Parimutuel Markets on Optimism and Polygon. The simple but powerful smart contracts at the foundation of Thales Market allow you to participate in markets for different crypto assets. Thales protocol continues to innovate by offering community based games like Thales Royale and more advanced trading products like Ranged Markets. Traders can take part in custom markets and speculate on real-world events (like timing "The flippening") in an uncensorable and fully permissionless way using the Exotic Markets platform.
What is unique about the positional tokens (UP, DOWN, IN or OUT) there are no liquidations involved, you can only lose what you risk on each market and no more!
If you never used Thales, checkout this awesome market walk through (my favorite market is the $SNX UP):
Unlike Synthetix where fees are distributed to stakers, Thales is implementing a buyback and burn feature (every 24 hours) using a portion of the fees generated from their protocol and products (Overtime and Exotic Markets). This is outlined in TIP-50
Right now Thales is distributing their 900,000 $OP tokens for using their protocol and products.
This includes UP and DOWN token buyers, Ranged IN or OUT token buyers, Staking, LPing, using Overtime Markets and Exotic Markets! This tweet sums it up
An incredible writeup about Thales can be found here:
Overtime Markets: Overtime is the first fully decentralized sports markets platform! Thales AMM model allows Overtime to create instant liquidity around sports markets.
They recently announced a FPL league with 10,000 Thales in prizes. If you are into sports betting then Overtime is your platform to use, who needs draftkings when there is Overtime Markets! Earn $OP while betting on your favorite sports team!
Currently Overtime has MLB, MLS, NFL, and the MMA. Many more leagues are to come, including the much anticipated NBA and NHL.
Exotic Markets: Exotic Markets was built by community members on top of Thales smart contracts, allowing anyone to create custom markets in a decentralized way.
Want to bet on current politics, sports, crypto, finance, or popculture ? Then you need to check this out! My favorite market is if Optimism will have more than 1 billion TVL on November 1st, 2022 - all you have to do is choose Yes or No, and wait for the time to pass.
Dhedge/Toros: dHEDGE is a platform for managing investment activities on the Ethereum blockchain where you can put your capital to work in different strategies based on a transparent track record. On dHEDGE, managers can trade synthetic crypto, fx, commodities, and even equities - both long and short.
dHEDGE leverages the Synthetix protocol and their zero-slippage model. They have risk-adjusted ranking of managers which makes it easy for investors to find really the really good managers. As with most DeFi protocols, dHEDGE is non-custodial in nature, meaning that investors remain in control at all time and choose to enter or exit a pool at any time.
The dHEDGE token, $DHT, serves multiple functions:
- Facilitate decentralized governance
- Incentivize investors to pool assets with top-performing managers
- Incentivize managers to earn greater return
DHT distributed via staking and performance mining is done by increasing the circulating supply of DHT (inflation). Tokens distributed via the Protocol Treasury are done by liquidating a portion of the fees the protocol captures (protocol revenue).
Want to see what Dhedge has this year and what their current roadmap is, then check this out!
Dhedge has been leaking all kinds of Alpha on their twitter. It appears managers may soon be able to use Lyra and Kwenta !
Toros Finance is a dHEDGE incubated protocol integrating Aave and 1inch. Toros Finance aims to simplify access to complex derivative strategies, safely, via offering these strategies through a single token. Toros Finance offers a suite of on-chain tokenized derivatives products. Currently Toros is deployed on Polygon and Optimism.
Toros volume exploded when they released the Synthetix Debt Hedge token on Optimism.
Starting soon you can earn $OP while you hedge your debt! This is amazing for any Synthetix Staker who wants to properly manage their debt!
Most VCs get a bad rep in crypto, and for a good reason. Aelin plans to fix that, as raises on Aelin tend to help the community and give organic growths to protocols. If you didn’t know already Aelin is a protocol that enables the decentralization of the fundraising process.
Instead of having to rely on a VC to fund your project and potentially not align with your community and goals, you can sell directly to your community and still see your protocol goals comes to fruition.
A raise with Aelin can be done in four steps:
- Create a Pool and present deal terms
- Investors deposit capital
- Exchange investment tokens for deal tokens
Currently Aelin received 900,000 $OP tokens and is partnering with Velodrome on Optimism to help distribute these $OP tokens.
Aelin is distributing voting rewards (also called "bribes") in OP in order to maximize the VELO rewards emitted to the AELIN/WETH pool. This means LPs will be earning VELO instead of AELIN. It is important to note that the Velodrome DAO will be matching rewards with Aelin treasury making emissions of VELO larger than the previous token incentive program.
As described in AELIP-22, the current distribution of OP will follow the plan below: 40% to LP stakers (AELIN/ETH), or equivalent program to maintain liquidity on the AELIN/ETH pair 60% to a pool incentive program OP tokens will be taken from the 40% kept to reward LPs. A total of $16,000 USD in OP will be taken from this allocation to run this trial. If results are satisfying at the end of the 4 weeks, another AELIP might be presented to extend this program. This is spelled out here:
A recent project using Aelin for a raise is Muse Group:
That ends the Synthetix ecosystem on Optimism for now, so lets explore some other protocols are becoming symbiotic in the OP ecosystem.
Velodrome is a decentralized exchange and liquidity marketplace on Optimism. Their mission is to be the liquidity base layer of Optimism, allowing users to trade digital assets in a secure way, with very low fees and low slippage.
As an AMM adapted from Solidly, Velodrome shares certain features with AMMs like Uniswap, with certain modifications:
- trading fee of 0.02%
- near-zero slippage on uncorrelated or tightly correlated digital assets
- route trades through stable and volatile asset pairs
- no-upkeep, flashloan-proof, 30 minute time-weighted average price (TWAP) with direct quoting support
It incorporates elements of Curve, Solidly and Votium with ve(3,3) tokenomoics.
The project has been described as a combo between leading stable liquidity protocol Curve, Andre Cronje’s infamous Solidy, and Votium (a protocol for earning bribes on Curve/Convex).
- Velodrome liquidity providers earn VELO emissions
- veVELO holders vote on which liquidity pools receive these VELO rewards, and pools earn in proportion to the voting power they accrue per epoch, i.e. each week
- veVELO holders then earn from the trading fees generated by the pools they voted for in proportion to their voting power
Finally, veVELO holders also earn from the bribes paid out to the pools they voted for, as well as from veVELO rebases which are non-dilutive, meaning veVELO holders receive veVELO from them rather than VELO
There are two kinds of pools on Velodrome:
- “Variable Pools” for uncorrelated assets, like its SNX/sUSD pair.
- “Stable Pools” for correlated assets, like its USDC/sUSD stablecoin pair or its WETH/sETH stable asset pair.
Velodrome has a sweet $OP distribution plan to their $veVELO lockers!
Checkout their dune dashboard to follow along on stats:
Aave V3 needs no introduction, but having them finally on Optimism is a blessing! They recently received 5 million $OP tokens from the OP Foundation.
Once they kicked on incentives the TVL skyrocketed 5000% in 30 days, and now sits at 552 million on Optimism.
Granary: The Granary is a decentralized, user-driven borrowing and lending liquidity market inspired by AAVE V2. What is not listed on Aave gives Granary their niche for lending on Optimism! Currently you can deposit your $OP tokens and earn 3-25%APY, and then borrow $USDC from 1-3% APY
Granary plans to Launch sUSD and SNX deposits here soon. The roadmap for Granary can be found here:
Hint: Their token airdrop on Optimism has not happened yet, and will go to protocol users with more geared towards folks who borrow.
Pickle Finance is a yield aggregator. They aggregate and compound yields from other protocols. It saves you time and money compared to doing it yourself. Yield Aggregators exist for yield farmers (like you) who want to invest money and maximize profits by leveraging different DeFi protocols and strategies for elevated returns.
Pickle Finance makes it easy for you to earn great compounding yields on your deposits, when you don’t have the time to compound it daily or the gas fee is too high for frequent compounding to be done.
They came to Optimism around early February 2022, and recently received 200,000 in $OP tokens to distribute to protocol users!
Pooltogether is a crypto-powered savings protocol based on Premium bonds. Save money and have a chance to win every week!
This is a great place to deposit $USDC you want to save on Optimism. Current yields for $USDC are 10% APR (3% for USDC and 7% OP tokens), with a chance to win daily prizes:
Pool together received 450,000 $OP tokens to distribute to users.
Pooltogether recently came out with a new feature that allows users to delegate their yield to other wallets. This means you're giving another wallet additional chances to win prizes without losing custody of the underlying deposit. You share your odds with others but keep the funds.
This is super powerful and can give DAOs the ability to deposit treasury funds and delegate to their users or token-holders, or an individual could delegate to friends and family to effectively onboard them to Defi!
Protocols not mentioned in detail but deserve a HUGE shoutout: Uniswap, 1inch, Curve Without them Synthetix would not be where it is!
All good things must come to an end. I hope you gained something from this!
Fellow Spartans, this is not financial advice, but I leave you with some highly risky (degen) strategies I have heard mentioned in various discords:
- Some Spartans are taking their $OP airdrop, and depositing on Granary, then borrowing $USDC to take to Pooltogether, depositing on Velodrome (farm some high APR pools), or depositing on a pool at Pickle finance (farm high APR pools)
- Some Spartans are taking their $sUSD they claim each week from Synthetix, and then immediately trade on Kwenta (some like to x10 short/long to hedge, and some like to x5 $Eth to keep up with their debt pool), are buying $Eth Puts/Calls on Lyra (September $2,500 buy calls look delicious), or trade the SNX UP market on Thales!