The Andromeda Release marks a significant evolution in Synthetix, introducing Core V3 and Perps V3 deployment, incorporating USDC as new collateral, and expanding to Base. This step elevates Synthetix to a multi-chain protocol.
A key feature of this release is the implementation of a buyback and burn mechanism for the SNX token, utilizing fees generated from Perps on Base, as outlined in SIP-345.
Mechanism of Buyback and Burn
As per SIP-345, 40% of fees earned on Base are designated for the buyback and burn of SNX tokens, executed via a yearn-inspired buyback and burn contract. After allocating the integrator's share, the net fees are divided according to the following structure:
Fee Allocation from Andromeda on Base
- Partners: 20%
- LPs: 40%
- SNX Buyback and Burn (BBB): 40%
Note: These percentages are subject to change with future SIP/SCCP approvals.
Overview of the Andromeda Release
The Andromeda Release represents a significant step in Synthetix's evolution, introducing Core V3 and Perps V3 and incorporating USDC as a new form of collateral. This development transitions Synthetix into a multi-chain protocol across the Optimism Superchain. Key new features for Perps V3 include cross-margin and multi-collateral support, USDC perp margin, and improvements to the Perps engine.
The release also marks a testing phase for Synthetix, particularly with USDC as collateral on the new Base blockchain. This strategic move is expected to attract more developers, liquidity providers, and traders, broadening the Synthetix ecosystem. Andromeda's success will be gauged by its market performance, liquidity provision, and user experience, setting the stage for Synthetix's future multi-chain plans.
Reducing the SNX Token Supply
The buyback and burn strategy aims to decrease the overall SNX token supply. It involves allocating fees generated on the platform to purchase and subsequently ‘burn’ SNX tokens, removing them from circulation.
Following the recent ending of SNX token inflation as per SIP 2043 and the isolated Base deployment, this method efficiently rewards SNX holders, negating the need for a complex multi-chain bridge and burn system. It also benefits SNX holders by eliminating penalties for non-staking, as detailed in The End of Synthetix Token Inflation.
Past and Future Fee Results
Synthetix has experienced a notable increase in fee generation, with Perps V2 accumulating over $31 million in trading fees. The Andromeda Release, with its enhanced functionality and multi-chain capacity, is expected to continue this upward trend, reinforcing the buyback and burn strategy.
The Future of Buyback and Burn
As Synthetix expands into new chains, the buyback and burn mechanism remains a key strategy for fee distribution in the short- to medium term. However, Synthetix Governance has signaled a willingness to adopt more streamlined cross-chain fee distribution methods as they become technologically viable.
If you've got any comments or questions, join the conversation on Discord.