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Neutral debt pool incentive trial

A new trial to incentive people to balance the debt pool by holding iETH

Neutral debt pool incentive trial

Update (April 28, 2020)

We are making some adjustments to the iETH incentive trial to make distribution simpler and to ensure we can be prepared for iETH reaching its upper or lower limit.

The trial will use a staking contract for iETH holders to stake their iETH into. This will allow participants to claim their own weekly SNX rewards through the contract. Here's how it works:

  • We will freeze rewards from block 9959999, which is around 7pm tonight (AEST).
  • We will pay out these five accrued days of rewards manually.
  • After block 9959999, iETH holders can safely migrate to the staking contract without losing any rewards.
  • We will give people until tomorrow, April 29 at 11am (AEST) to stake their iETH in the contract. We will add 10,000 SNX into it to pay out the rest of this week (which lasts until this Friday 11am, AEST).
  • We will deposit 32k to cover next week, beginning on Friday, May 1 at 11am (AEST).
  • We are also raising the iETH limits to prevent iETH from freezing (SCCP-18).
  • If iETH freezes we will halt the trial and no more rewards will accrue from the end of that reward week.

The staking contract can be accessed by connecting your wallet to Mintr.

To make this possible, we will be pushing a small release tomorrow (AEST) for SCCP-18, which widens the iETH limits.

If you have any questions about how this new process works, come join us in Discord.

Original Post (April 24, 2020)

There’s been a number of discussions in Discord over the last six months about balancing the debt pool, which is currently skewed long in ETH. We have looked at shifting liquidity incentives from the sETH pool in Uniswap to Curve as one example, and while this has had an impact the skew is still present in the debt pool. While SNX stakers can and should hedge their exposure to the pool, it is still important to optimize for a balanced debt pool.

We will thus run a trial incentivising people to hold iETH to balance the debt pool and reduce long bias.

How it works

This method will attempt to replicate as closely as possible the structure of dynamic funding rates used with synthetic futures planned for Q3 where longs will pay shorts and vice versa depending on the skew. This trial will help gather data around how sensitive Synth holders are to various incentives to balance the debt pool.

The expectation is people who are currently holding stablecoins will construct a market neutral position using iETH and ETH while generating an SNX yield for balancing the debt pool. Because iETH moves dollar for dollar against ETH, constructing this position simply requires holding an equal number of iETH and ETH. For example someone could take USDC and convert to 5 iETH and 5 ETH and be market neutral.

Here are the details:

  • The trial will run for 4 weeks, and will involve distributing SNX to anyone holding iETH each week.
  • We’ll start with 32,000 SNX a week, but we will adjust the amount each week depending on how successfully it is balancing the debt pool.
  • The trial will begin at block 9933399.
  • There is the risk of iETH getting frozen (due to reaching its price limits), so we will aim to purge any holders into sUSD and restart it within a few hours during the trial.
  • The current limits are $90 and $270, if Ether hits either price bound iETH will be frozen and will need to be rebalanced.
  • We’ll take a continuous measurement of balances throughout the week, work out the average holdings over the course of the week, and airdrop the pro-rata SNX rewards at the end of each week.

We are looking at implementing a simple zap mechanism to allow users to easily go from any stablecoin into a iETH/sETH position to capture this incentive. In the meantime, you can use the Curve pool to acquire sUSD and then Synthetix.Exchange to trade it for iETH.

If you’d like to discuss this or any other aspect of Synthetix, please come join the conversation in Discord.