SNXweave Weekly Recap 43

SNXweave -

June 14, 2022

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.

Spartan Council and SIP updates

Present at the June 7, 2022 Spartan Council Weekly Project Sync:
Spartan Council: Afif, calavera, Danijel, ksett, Mark
Core Contributors: Ale, Cavalier, KALEB, Rafa, Steve

First off, it’s election season again! Crazy how fast time flies. And in exciting news, this election will be the first to feature the brand new V3GM election module! Nominations opened last Friday and will close THIS Friday the 17th, after which voting will begin. Thanks to V3GM, nominations no longer happen in the Synthetix Discord. Check out the blog post Matt posted for an in-depth explanation of how to nominate yourself!

And if you’re running for Spartan Council this epoch, be sure to also be on the lookout for details about the Spartan Council Election Panel hosted by SNXweave!

Now onto our regular news updates…

The Saiph release has gone out! This included three SIPs:

  • SIP-235: Update Issuer Modifier: Increases security for future Synthetix deployments for the onlyTrustedMinters modifier in Issuer.
  • SIP-238: Only allow token transfers via proxies: Allows users to interact with SNX, as well as synths, via their proxies, and stops allowing transfers via their implementations. By restricting transfers to the proxy only, this SIP mitigates possible accounting issues in protocols that use Synthetix tokens.
  • SIP-240: Update Liquidate Amount: This SIP ensures that the correct amount of debt is liquidated for accounts with mostly escrowed SNX.

Saiph went out last Thursday, wrapping up the last of the most recent urgent fixes.

During their meeting last week, the Spartan Council also discussed SIP-244 for the new inflation mechanism. Written by JVK and Danijel, this SIP proposes reducing inflationary SNX staking rewards by 1% each week until the target of 20% yearly inflation is reached. A number of Council members brought up concerns that the inflationary rewards are getting to be too high.

The Target Staking Ratio SIP was originally implemented with the hope that it would attract more stakers, but the protocol seems to have reached a local plateau in terms of the number of users willing to stake. Based on the current rewards, the yearly inflation amount is about 45–50%. Danijel said that, while there seems to be mixed viewpoints from the community on this issue, many do believe that inflation needs to come down. Ksett brought up that such an abrupt change could create issues, and Afif suggested possibly lowering it incrementally. This SIP has been rejected with 6 votes against.

The Council also discussed Core Contributors (CCs) on DAOs, with Calavera asking if there are any rules about CCs being on the Councils or Committees. Danijel confirmed that there are no rules against it, but pointed out the additional time commitment it takes to serve on any of the Councils. Calavera suggested that he might write a SIP in the future limiting the number of CCs on any given DAO, but Danijel responded with a previous argument that the token holders can and should be trusted to make those decisions when they vote.

Lastly, it was brought up that 1-inch just integrated with Synthetix atomic swaps, which resulted in a $40–60 million daily volume increase. Kaleb said they have been available for a while, but it was only recently that we were able to take full advantage of them. Adding forex increased usage, but the 1-inch integration added to that even further. More integrations are likely to happen in the future. This has also had a very positive impact on the ETH skew, which was the issue that that inspired the proposal of the DAI wrappr SIP during the previous epoch. The current skew is 50% long ETH.

There were also a few SIPs presented last week, so let’s discuss them:

SIP-247: Set up new wETH Wrappr

  • This SIP, presented by Kaleb, proposes creating a wETH wrappr with a mint and burn fee rate of 5 basis points, and a max token amount of 5,000 ETH. This aims to create more flexibility by allowing an unwind with a negative burn fee rate.
  • The issue is that the supply of sETH in curve pools is shrinking, meaning this could potentially create a premium on sETH. The depletion of the curve pool synths also affects the usability of atomic swaps.

SIP-300: Overview of V3

  • In a separate call, Afif presented SIP-300, the first of the Synthetix V3 SIPs
  • V3 aims to rebuild Synthetix as a more versatile protocol on efficient contract architecture, while also alleviating the pain points of V2X
  • This first SIP is basically a summary of all things in V3, mostly covering the new proxy architecture and new debt pool structure
  • Afif explained that the differentiated debt pool would add flexibility and modularity to the staking process by allowing stakers to choose exactly how they delegate their credit — even down to the individual synths and products
  • Afif: “The obvious solution to this is to create a siloed debt pool for each market but the downside is you fragment liquidity, and we don’t want that. The power of Synthetix is liquidity and without it, it’s not super useful anymore.”
  • This is where SIP-303 comes in — this SIP proposes the creation of markets in V3, which are expected to accept sUSD, generate positions, and rely on liquidity provided by funds to back any debt inflation generated by their positions.
  • Afif explained that SIP-303 basically takes the protocol and separates it into a bunch of individual markets (spot, futures, etc.)
  • Lastly, he discussed SIP-302: Funds, which is not quite the decided name. Funds can be created by anyone, and serve as an intermediary by accepting collateral from accounts and providing liquidity to markets.
  • The Spartan Council fund will be the only one initially, and it will continue to choose all of the governance-approved assets
  • Afif assured everyone, however, that this does not fragment liquidity any more than the current V2X design

Grants Council

Present at the June 9, 2022 Grants Council meeting:
Grants Team: ALEXANDER, CT, cyberduck

In Grants Council updates, the team had a call with the Universe.xyz team to reconfirm that expectations are aligned on both sides. They are currently focusing on delivering the designs, and will be helping with the mint contract. Trading will happen on Quixotic, and the team will be reaching out to them to coordinate this. The Council is also still deciding on the lore portion of this project.

Next, some of the Tools site icons have been updated based on what designer Jade has completed.

Lastly, the team is working with the devs interested in working on the Wrappr UI project. A Core Contributor will have to review the code for this before it’s deployed, however.

Ambassador Council

Present at the June 8, 2022 Ambassador Council meeting:
Ambassadors: mastermojo, Matt, MiLLiE

In Ambassador Council updates, the Ambassadors hosted another Spartan Space last week, this time with dHEDGE and Toros, where we got to hear from Jake, Matt, and Jakey. Jake is the head of growth and marketing, Matt is a community manager, and Jakey is a core contributor on the contracts team at dHEDGE.

For some background, dHEDGE is an asset management platform that launched in August 2020 with very close ties to Synthetix. They currently have 1,300 funds on the platform, managed by 1,000 manager wallets. Toros is an incubated protocol that dHEDGE launched this past February. More specifically, it’s a protocol that’s structured for automated strategies, which ties in very nicely with dHEDGE’s funds service. Toros currently offers the following products:

  • 1x, 2x, 3x bull and bear funds on polygon for BTC and ETH
  • Managed liquidity services
  • Stablecoin yield products
  • dSNX

All of the guests were very excited to talk about the product they launched the day of the Spartan Space call: dHEDGE and Toros enabled a one-click debt hedging tool on Optimism! Now, each staker can hedge their exposure to the debt pool. This tool helps automate SNX stakers’ debt management by automatically mirroring the debt pool on Optimism. The dHEDGE Debt Mirror Index Token (dSNX) was initially launched on Ethereum Mainnet, but it is now on Optimism as well.

When asked what the future of this looks like, Jakey said AAVE is currently the best market for this strategy, but if there were a better market, they would farm on that one as well. It is currently a free service; however, they’ve been playing with the idea of possibly adding a fee if users were interested in a product that included some yield rather than being strictly a hedge.

The Ambassadors also asked how the other funds have been performing, and the guests replied saying a lot of the pools were performing better last year but have obviously dropped off in this bear market. They added that they’ve seen a lot of pools migrate from Mainnet to Optimism, and the ones that have done so lost their public track record that was available on L1. The team, however, is looking at a way to be able to transfer that over.

Lastly, when asked how the process of adding a whitelisted protocol works, Jakey explained that they first look for protocols that add utility, then look for those that are seeing healthy adoption, and finally consider the complexity of a possible integration. dHEDGE promises just-in-time liquidity, so users have to be able to access their funds on demand. So, anything that requires a lockup or cooldown period is an automatic no-go. All of these factors are considered in the governance process that ultimately makes up the decision of what protocols get whitelisted.

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SIP/SCCP status tracker:

SIP-235: Update Issuer Modifier, Status: implemented

SIP-238: Only allow token transfers via proxies, Status: implemented

SIP-240: Update Liquidate Amount, Status: implemented

SIP-244: New Inflation Mechanism, Status: rejected

SIP-247: Set up new wETH Wrappr, Status: draft

SIP-300: Overview of V3, Status: draft

SIP-303: Markets (V3), Status: draft

SIP-302: Funds (V3), Status: draft