SNXweave Weekly Recap 111

SNXweave -

October 18, 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

  • Fee share discussion:
  • Burt brought some numbers to the Council — at 20% liquid fee share, integrators would need to drive volume 33% higher to be profitable
  • Millie thinks this volume increase is possible with the Base deployment
  • Burt said cost to run frontends comes to around $200,000/month
  • dYdX discussion
  • Permissionless derivatives: Kaleb said one of the biggest concerns is how to allow permissionless markets without undercollateralizing sUSD
  • Tokenomics: proposals are being reviewing, ML_sudo is working on a document to asses all of the current proposals side-by-side. There are currently three proposals, and the Council would like to come to a consensus on one and present it to the community.

Spartan Council and SIP updates

Present at the October 11, 2023 Spartan Council Weekly Project Sync:
Spartan Council: Burt, cyberduck, Genefaesius.eth (Gene), Jackson, Millie, ml_sudo
Core Contributors: Cavalier, joey, KALEB, Noisekit, troy

The Spartan Council and Core Contributors started off their meeting last week by discussing fee share. Burt came back with some numbers — at 20% liquid fee share, integrators would need to drive volume 33% higher to be profitable. In response to anyone who argued that 20% would detract from staking rewards, he emphasized that the increased volume would generate 300% in additional fees for stakers.

He highlighted again that there would be no volume without frontends, and there is a pretty clear number where building front ends is not economically viable. That number is less clear for LPs (i.e. at what level of staking rewards does the protocol begin to lose stakers because they are no longer being adequately compensated for the risk they are taking?).

Millie responded by saying there should be some expectation of upfront risk when building out any product, but he thinks a 33% volume increase is possible just via the Base deployment. ML_sudo stressed that this number shouldn’t be set in stone right away, and that there should be the possibility to reassess based on new data in the future.

Burt again brought up that the cost to run frontends comes to around $200,000/month (and Polynomial said they were close to $250,000) — and this is JUST the operating costs. Kwenta has funded some referral programs using the Kwenta token, but Polynomial has held off on launching these programs because they don’t have a way to fund them. Burt also expressed interest in launching a more traditional advertising campaign.

Jackson brought up the fact that dYdX generates $1 billion in daily volume. Split across 3 integrators, this would generate enough fees at 10% to meet the operating budgets and more. Millie thinks one of their big advantages is that they offer USDC pairs (and are not constrained by sUSD liquidity). This is a huge potential bottleneck for a successful Base deployment, Cav will be taking this back to the Treasury Council.

Duck also mentioned that he recently heard a podcast from dYdX where they were talking about building their own app chain and developing their own liquidity layer on that chain. They also discussed permissionless derivatives and ways they could learn from what Synthetix was planning, so he wanted to discuss Synthetix’s progress in permissionless derivatives.

Kaleb said one of the biggest concerns is how to allow permissionless markets without undercollateralizing sUSD, which is being worked on, but the main focus of the CCs right now is the deployment of V3. Cav added that there have been some draft governance proposals for the new V3 markets, and they have helped to demonstrate what third parties need to understand in order to make those markets happen (and the Docs are being improved and updated to reflect that).

The other component is the redesign of the staking interface to support multiple pools and markets. The release and monitoring of Perps V3 should also provide valuable feedback on how the system functions, which would then be relayed to any project that would like to deploy a pool/market of their own. Everything basically boils down to having a good risk understanding of how those markets would impact sUSD.

Lastly, the SC and CCs discussed tokenomics proposals, as ML_sudo has been working on a document to assess all of the current proposals side-by-side. There are currently three proposals, and the Council would like to come to a consensus on one and present it to the community. After getting community input, it should be more clear what priorities need to be met by a specific deadline.

Millie stressed that there may not be a way to approach the tokenomics discussion, specifically highlighting that it’s not totally clear how V3 will perform across multiple deployments. ML countered this by saying it’s important to continue moving the conversation forward, and there can still be discussion on the key principles that the Spartan Council should be considering when making these decisions.

Burt suggested starting with the “lowest hanging fruit” that could be separated out of this larger discussion. For instance, there is consensus that cross-chain fee share should be implemented using cross-chain messaging solutions, so work on this can begin as soon as that solution is fully implemented. And a manual process could be used in the meantime to distribute the fees across chains.

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SIP/SCCP status tracker:

SIP-336: Deploy V3 Core to Base, Status: approved

SIP 341: Add Configurer Address, Status: draft

SIP-342: Add missing view functions to access current configurations and state, Status: draft

SIP-343: Add extra fields to existing Market Events to track market debt changes, Status: draft

SIP-323: Adopt “s” prefix for Synthetix V3 asset tickers, Status: approved

SIP-312: Cross-Chain Pool Synthesis, Status: draft

SIP-337: Perps V3, Status: draft