Transitioning to Synthetix V3: Scaling sUSD & Migrating SNX

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Synthetix is undergoing a pivotal phase of the V3 rollout, introducing a new foundation and architecture for the protocol. This transition also marks a significant step towards enhancing the scalability and decentralization of the Synthetix stablecoin, sUSD.

Accelerating Real Yield

The previous V2x system primarily incentivized participation through the inflationary minting of the SNX token. However, Synthetix V3 shifts away from this model, instead focusing on:

  • Generating and distributing real yield from trading fees to liquidity providers
  • Introducing a buyback and burn mechanism, where trading fees will purchase and remove SNX from circulating, aligning incentives for SNX stakers and holders.

This new approach aligns with Synthetix’s goals of scaling a decentralized derivatives ecosystem built upon its liquidity and infrastructure.

Expanding sUSD Collateralization

In the V2x system, sUSD was collateralized solely against the native SNX token. With V3, sUSD will be backed by a range of collateral assets, including SNX, ETH, USDC, yield-generating collateral (stataUSDC), and other governance-approved tokens. This expansion of collateral options will contribute to the scalability of the sUSD stablecoin in V3. 

Alongside this, LPing (previously staking) is simplified in Synthetix V3, due to its delta-neutral design for both Synthetix Perps & Spot Markets, making it easier for users to participate in the ecosystem.

Facilitating the V3 Migration

The migration of SNX and sUSD from the V2x system to the new architecture will begin in June, signaling a critical step towards scaling the new system. To facilitate the upcoming migration, several supporting measures begin next week:

  • Increased OP incentives for sUSD liquidity on Velodrome (Optimism): Incentives for providing liquidity in the sUSD/USDC pool on Velodrome will be increased to 10,000 OP tokens per week. Both Velodrome and Synthetix will be utilizing their OP sUSD growth grants to support this initiative.
  • SNX Incentives for sUSD liquidity on Curve (Ethereum Mainnet): Synthetix will introduce 20,000 SNX tokens per week in incentives for liquidity providers in the sUSD/USDC/DAI/USDT pool on Ethereum Mainnet.

Migration Plan and Mechanics

The migration to Synthetix V3 will proceed in two phases:

  1. Ethereum Mainnet Migration: SNX stakers on Ethereum Mainnet will be able to migrate their positions to V3 in June.
  2. Optimism Migration: Following the Ethereum Mainnet migration, Synthetix V3 will be deployed to Optimism, and the migration process will extend to Optimism SNX stakers. 

The migration mechanics outlined by SIP-306 provide a clear framework for the transition:

  • SNX Migration: The SNX token will continue and be migrated from Synthetix V2X to V3 without the necessity for burning staker debt. 
  • sUSD migration: sUSD will be migrated to a new V3 sUSD (snxUSD) token. This new stablecoin will be collateralized by SNX, ETH, USDC, and other governance-approved collateral types, contributing to the scalability and resilience of the Synthetix stablecoin.

As the transition to Synthetix V3 comes to fruition, the focus remains on building a scalable, decentralized, and robust ecosystem of derivative protocols upon Synthetix liquidity and infrastructure. The V3 migration represents a critical step towards realizing this vision and enabling an ecosystem of builders, traders, and liquidity providers to scale onchain derivatives.

Any Questions?

If you have any questions, head to the Synthetix Discord.