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Protocol Design for Synthetix

Back in 2018, we supported Synthetix to launch a stablecoin. Today, Synthetix is one of the most prominent DeFi protocol offering different synthetic assets. Recently, Cryptecon was asked to support Synthetix again to develop a decentralized futures contract.

euros and coins in front of a laptop

Client

Synthetix

Project period

2021 – 2022

Team

Juan Beccuti, Matthias Hafner, Urs Trinkner

Contact

Matthias Hafner
Project Description

Synthetix protocol offers different synthetic assets/stablecoins. Today, Synthetix plans to add perpetual futures to its ecosystem.

The original concept is based on a dual-token system. Demand fluctuations for the stablecoin, named sUSD, are absorbed by a collateral coin called SNX. Our previous analysis showed that under reasonable assumptions and parameters, SNX holders’ incentives are aligned with the system’s goal of exchange rate stability. Thus, SNX holders sell or buy sUSD depending on the prevailing valuation pressure to keep its value close to USD 1. The past three years have proven that the incentives are aligned and Synthetix can create coins that are stable in value.

Today, Synthetix plans to add perpetual futures to the ecosystem. Traders receive or pay a funding rate depending on whether more short or long positions are open. This funding rate incentives traders and arbitrageurs to balance positions. In addition, some of the funds will be added to the debt pool to ensure the system's stability. Cryptecon supports Synthetix using mechanism design and simulation techniques to find the optimal design.

Methods
  • Mechansim design
  • Monte Carlo simulations
  • Game theory

More information

 

 

 

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