SNXweave Weekly Recap 106

September 13, 2023

The following post contains a recap of news, projects, and important updates from the Spartan Council and Core Contributors, as well as the Grants Council and Ambassador Council from last week.

👉TLDR

• V3 core system: several minor, technical SIPs are in the release process
• Perps V3: the SIP for Perps V3 is up (but changes will still be made leading up to the presentation) & the preliminary audit report has been received (no critical issues here), CCs are still working towards the Perps V3 testnet competition — more details coming soon
• An L1 Perps market is also in progress
• Migration plan for V3 was discussed by the SC & CCs
• SIP-338: Deploy the SNX token on Base via Base Bridge presentation recap
• Review of Synthetix Treasury Proposal (STP) call with Kain, Carrot Anderson, Cavalier, ML_sudo and Spartan Glory
• STP-2: Data Analytics Working Group presentation/discussion recap
• STP-3: Synthetix Ecosystem Fund presentation/discussion recap
• STP-4: V3 SNX Staking Pool presentation/discussion recap
• STP-5: Development/Sales Working Group presentation/discussion recap
• Grants Council update: sorting out launch of NFT website & URL, burner wallet to set up Opensea NFT auctions, CT to get council mandates, watcher page update, Sunny reviewed overtime Markets V3 proposal & will chat with Cyberduck, Perps V3 trading competition soooooon

Spartan Council and SIP updates

Present at the September 6, 2023 Spartan Council Weekly Project Sync:
Spartan Council: Adam, Burt Rock, Cyberduck, Genefaesius.eth (Gene), Jackson, Kain, Millie, and ML_sudo
Core Contributors: Afif, Bex, Cavalier, KALEB, Matt, Mike, noah, Noisekit, Rafa, sunny, troy

As a core system V3 update, a number of SIPs are in the release process – mostly minor, technical SIPs that were previously approved. With the core system feature-complete and at parity with V2, any updates this epoch will be driven by the Spartan Council. Noah clarified that as community representatives, the SC may propose upgrades in reaction to community needs.

The CCs are also still working towards the Perps V3 testnet competition, the details of which should be released in a blog post any day now. Mike already shared that the competition, hosted by the Grants Council, will have a $15,000 prize pool and 15 Spartan NFTs for selected winners. The competition will take place on Base Goerli, and will help battle-test the Perps V3 mechanism and identify any remaining bugs before it gets deployed to mainnet.

And speaking of Perps V3, the SIP is up on the repository, but changes will still be made leading up to the presentation (with two changes specifically being made to make large liquidations more efficient). The preliminary audit report for Perps V3 came back with minor feedback to address a few things, but nothing major that would affect the testnet competition. The CCs noted, however, that a critical item that needs to happen before the testnet competition is that integrators need to integrate with the ERC-7412 (On-Demand Off-chain Data retrieval).

An L1 Perps market is also in progress – this would mostly serve integrators and very large traders due to the gas requirements. This would be a very bare bones market compared to L2 Perps and is optimized for potential integrators such as stablecoin issuers. Gene voiced concern that this use case may hoard much of the open interest, but Afif explained that perps markets are designed such that any extreme positioning creates arbitrage opportunities that are likely to be capitalized on. He added that a nominal rate on open interest could be considered in the future to make it more attractive for liquidity providers.

The SC also discussed the migration plan for V3, which Adam brought up. In the current plan, V3 will continue to back V2, allowing users to migrate on their own time. While there won’t be a strict cutover to V3, rewards will shift over time to hopefully create a natural incentive for users to migrate.

Kain also brought up debt migration, which has been deployed for a couple of months now. However, no UI exists for users to make use of these contracts, and the contracts still don’t support migration of safes. Noah said everybody should be thinking about where they want the liquidity to be in V3, and that this can be reactive to the needs of the community.

Next, SIP-338 to Deploy the SNX token on Base via Base Bridge was presented last week by Matt. He explained that this is a standard bridge for base and any custom work would require code changes in V2X. ETH may be used as collateral later, but allowable collateral is outside the scope of this SIP. This proposal is simply the creation of an ERC-20 contract on base and would allow users to bring their SNX to base. Additionally, the Synthetix Treasury Council's Aerodrome can bolster SNX liquidity on Base at no additional cost to the protocol.

Adam brought up the fact that the token should be added to Base with role-based minting, which would allow for other minters in the future if required. Matt agreed to add this language to the SIP, and the Spartan Council signaled support for this proposal.

Treasury Council updates

Present at the September 6, 2023 Treasury Council STP discussion call:
Treasury Council/STP authors: Carrot Anderson, Cavalier, Kain (previous epoch TC & STP author), ML_sudo (STP author), SpartanGlory

Next up, in exciting news, SNXweave hosted the Treasury Council last week in the Synthetix Discord governance-stage to discuss some of their recent Synthetix Treasury Proposals (STPs) with the community! These STPs are a relatively new concept – the guidelines were created in May by Kain, Carrot Anderson, Elliptic Curve, and Spartan Glory.

As detailed in these guidelines, an STP is a “document that outlines a proposed ongoing management process or one time use of Synthetix treasury funds.” While a formal proposal template is not required by governance for the Treasury Council, the introduction of STPs aims to provide clarity to the community and facilitate community input. In addition, STPs will serve as documentation for the treasury processes and assist with handover at the end of each epoch.

That being said, the TC joined us to discuss STPs 2, 3, 4, and 5 (all of their recent ones!). So, let’s talk a little about what we discussed with them last week, and what each of these STPs entails.

STP-2: Data Analytics Working Group

• This STP proposes spending up to $250k to fund a data analytics working group
• The motivation behind this proposal is the need for a dedicated allocation of resources to ensure accurate and maintained data across Synthetix
• There hasn’t been a set way of managing this in the past, so the task has typically fallen on one or more CCs as a secondary work objective
• The goal here is to create a single Synthetix data layer that integrators and other front-end builders can point to for all things Synthetix data-related
• Kain pointed out that analytics has always been sort of an afterthought for whoever is doing it, and that there have been attempts to create this function under the CC umbrella, but it eventually falls apart as other more pressing priorities arise
• An application process will be defined by the TC, enabling interested teams and individuals to apply for the working group. The working group will need close access to the CCs and/or come from within the Synthetix community to have the required contextual understanding of these challenges and previous attempts at solving them
• Gene asked what a dedicated working group would entail, and if the TC will write deliverables. Kain responded saying it would be a group of people working solely towards this one objective, and that group cannot be pulled into any other core protocol functions. There will also be clear KPIs and expectations monitored by the TC and community, and it will be funded by the TC
• Reflecting on his epoch with the TC, Kain also envisions these working groups helping to provide continuity across epochs, as they will have worked with previous councils and would allow new councils to get up to speed faster

STP-3: Synthetix Ecosystem Fund

• The purpose of this fund will be to make investments on behalf of the protocol to increase the Synthetix Treasury for the community
• The proposal will eventually allocate up to 10% of the SNX treasury towards this objective
• A big motivation of this STP is to diversify treasury holdings so SNX doesn’t always have to be sold first to meet protocol operating needs
• Spartan Glory highlighted that Synthetix has been incredibly helpful to many DeFi protocols, but has not really seen commensurate economic benefit
• Allocating SNX in exchange for other governance tokens also serves to better align incentives with partner protocols
• There are no deals on the table currently but there was TC support for proceeding conservatively

STP-4: V3 SNX Staking Pool

• This STP proposes allocating funding to create and launch a trial SNX staking pool on Synthetix V3 to introduce users to the new system and identify any potential issues in a controlled manner before the full-scale launch
• Motivation behind this proposal is to offer yield on dormant SNX without the market exposure that comes with staking (this STP also proposes a terminology change from SNX staking to SNX Liquidity Provisioning)
• Since there will be no market exposure, the yield will be funded by the TC
• The yield would also be considerably less than staking so it’s not expected to reduce the collateral base for other Synthetix offerings
• This is also a low-risk test of the idea to position SNX as a token that captures fees/yield from several sources (rather than just staking)
• SNX is already its own separate pool in V3, per SIP-324 with its own rewards distributor (which is funded by the TC)
• There will be no lockup on this pool

STP-5: Development/Sales Working Group

• Lastly for the discussed STPs, this proposes establishing a white-glove service to onboard high-level traders and funds onto the Synthetix platform, offering incentives, technical support, and ongoing correspondence
• A number of large traders/funds have expressed interest in the platform but don’t know how to proceed, so the motivation would be to help onboard these big clients
• For a 6-month trial period, there would be a $500,000 initial budget that would be distributed in two phases: one at the beginning and one after 3 months depending on performance
• The budget, hopefully, reflects what is needed to sufficiently motivate a team with experience in this sort of work to do the job effectively
• $150-$200k will be dedicated to securing a lead for this group
• Much of the early stage of this initiative will be interviews with some of these bigger clients to figure out what can be offered at Synthetix to better suit their needs
• Burt asked what tools would specifically be offered to these clients, and Rafa explained that what they’ve seen in some of the initial requests is traders being interested in APIs that they might find on centralized exchanges. The CCs are currently creating specs for an SDK for these traders
• Similar to the Data Analytics Working Group motivation, Kain highlighted that there has never been a dedicated function for this kind of task as well, so it has also usually fallen on the CCs to bridge the gaps. As the protocol matures, he sees an increased need for specialization and sees a lot of potential benefit in funding a Business Development (BD) team
• Gene questioned whether onboarding traders was a job for Synthetix since it would practically amount to a Kwenta/Polynomial tutorial. Kain said the counterparty is still the Synthetix debt pool, and larger traders typically want to speak with someone in Synthetix
• Millie asked about KPIs, and Spartan Glory said the bottom line is obviously more integrations and more volume but BD can take time. At 6-months and beyond, the TC would expect to see some significant conversions and volume as a result of these efforts

Grants Council

Present at the September 7, 2023 Grants Council meeting:
Grants Team: ALEXANDER, CT, sunny, synthquest

Lastly, in Grants Council updates, Sunny is working on sorting out the launch of the NFT website and URL, and a burner wallet has been set up for the Opensea NFT auctions. For the watcher page, three tasks have shipped, PRs are being merged, and a new dev was added. CT is also working on getting council mandates, while Sunny reviews Overtime Markets V3 proposal, which he will chat with Cyberduck about. And, of course, the Perps V3 trading competition is being funded by the Grants Council and is coming soon!

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SIP/SCCP/STP status tracker:

SIP-337: Perps V3, Status: draft

SIP-338 to Deploy the SNX token on Base via Base Bridge, Status: draft

STP-2: Data Analytics Working Group, Status: draft

STP-3: Synthetix Ecosystem Fund, Status: draft

STP-4: V3 SNX Staking Pool, Status: draft

STP-5: Development/Sales Working Group, Status: draft