SNXweave Weekly Recap

August 13, 2021

The following post contains a recap of news, projects, and important updates from the Spartan Council and core contributors this week, as well as some performance highlights of those involved in governance.

Participants at the August 10, 2021 Spartan Council Weekly Project Sync: Kain, Jordan, Danijel, Spreek, Brian, Justin, Afif, David, Mark, Synthaman

It was an active week of trading on Synthetix, with over $233 million in trading volume over the past week. The council discussed the momentum of several SIPs, with contributions from many members on each topic. SIP-155 is ready to go and will soon be presented.

For those who are unfamiliar, this SIP proposes deprecating the synthetixDAO and replacing it with the Core Contributor Committee and Synthetix Treasury Council, which will be two separate entities.

As a brief background, the sDAO is one of the three governance bodies that were created following the decommissioning of the Synthetix Foundation — the other two being the protocolDAO and the grantsDAO. The latter two governance bodies have since been folded into the decentralized Synthetix governance process, which is why this SIP proposes that the sDAO now follow suit.

While SIP-155 details the plan for the Treasury Council, the Core Contributor Committee is being proposed in a separate, companion SIP. Once created, the treasury council will be composed of four members elected by SNX stakers.

Jordan brought up some potential candidates for the council, however a more in-depth discussion will come soon as more candidates emerge.

Next — SIP-146, which proposes adding synth supply caps, is currently in ice box in favor of other solutions that are being developed. Supply caps are intended to be a safety measure against tail risk from low liquidity synths, but Afif is currently working on a broader, more comprehensive framework called “simulated liquidity” to safely support synths for assets with any level of underlying liquidity.

In feasibility this week, there are a few SIPs where the discussion is ongoing.

As the L2 rollout continues, we have SIP-169 which proposes keeping only sUSD, sBTC, sETH, and sLINK on L1, and deprecating the other low volume synths that don’t have much activity and are generating lower volumes with high exchange fees. Several of these low volume synths also pose various front running and manipulation risks, which can be better solved on L2.

There has been some disagreement amongst the council members on how to handle this situation, as the discussion of which synths to keep on L1 is still ongoing. Kain stressed that there is no need to relist every L1 synth on L2, and that starting fresh with the synths selected for L2 might be the way to go.

Danijel, however, would like to see some sort of compromise here in order to keep some of the other synths on L1. Spreek also added that if some of the illiquid synths were to remain on L1, he would like to see safety measures implemented quickly.

Next, SIP-171, proposed by Andre Cronje from yEarn, has also moved into feasibility, with Justin and Kain now assigned to it. SIP-171 proposes allowing transfer of non-fee reclamation balances, which will in turn allow for atomic exchanges inside liquidity pools with fee reclamation.

For context, fee reclamation is a mechanism for next-price fulfillment that locks a user’s balance after executing a trade until the next oracle price update. This compels users to wait until the next price update for a trade to execute, and was originally designed to prevent frontrunning of oracle updates on Synthetix. In this SIP, Andre proposes making it possible to freeze only the pending trade amount, rather than the entire wallet balance. This way, liquidity pools containing synths can continue to function while trades settle. This may be particularly useful for pools containing things like Forex synths.

However, there is still an ongoing discussion about whether or not to leave the Forex synths on L1 for now. Spreek also expressed concern about the possible risk that this SIP might pose to Synthetix. Kain, however, mentioned that he has talked to Andre about this SIP and that it does not pose any risks to Synthetix.

Jordan also emphasized that this is the first stage of what’s potentially going to be on L1, and that the question of simulated liquidity and supply caps still need to be discussed.

SIP-148, which proposes an upgraded liquidation mechanism, is also still being assessed for feasibility, however Kain brought up that this is paused right now while Jackson is focusing on futures. There is also a need for an additional “debt shares” SIP as a way of distributing collateral from positions flagged for liquidation to SNX stakers and having them take on the debt rather than liquidating the collateral. Jackson is also working on the LINK wrappr SIP, which works the same as the ETH wrapper but for LINK.

Also approved this week is the L2 Bridged Governance SIP, which Justin says is very close to being done and will hopefully be executed next week. Currently, L2 contracts are owned by EOA which poses a risk on ownership and security. This SIP proposes a bridge to connect L2 contracts to a L1 Gnosis Safe, allowing the protocolDAO to execute actions on L2 contracts using the same mechanism used on L1.

On another note, the SIP for inflation diversion for L2 incentives was approved and has now been implemented. Given that Synthetix is now live on L2, with both staking and exchanging, SIP-170 proposed to divert the 25,000 SNX weekly incentives that the sDAO has been paying to encourage staking to instead come from the inflationary SNX token supply. This SIP has been implemented.

We also have a new core contributor on board, Darius, who joined Synthetix a few weeks ago. His background is in systems engineering, quantitative finance, risk management, and derivatives. He has been brought on to help with Synthetix perpetual futures, Lyra options, and risk in general. Welcome aboard, Darius.

Lastly, Rafa has been working on SCCP-133, which proposes increasing volume partner rewards to 10,000 SNX per month in order to bring the rewards up to an amount that is more reflective of the volume they provide. This will also come from the inflationary supply rather than coming from the sDAO. This SCCP is still in vote pending, so expect more updates to come.

SIP status tracker:

SIP-155: Deprecating the sDAO, Status: SC review pending

SIP-146: Add Synths Supply Caps, Status: ice box

SIP-169: Deprecate low volume L1 Synths, Status: feasibility

SIP-171: Allow transfer of non fee reclamation balances, Status: feasibility

SIP-148: Upgrade Liquidation Mechanism, Status: feasibility

SIP-170: Inflation Diversion for L2 Incentives, Status: ready for execution

SIP-153: LINK wrappr, Status: approved

SIP-167: L2 Bridged Governance, Status: approved

SIP-142: Deprecating EtherCollateral loans, Status: ready for execution

SIP-168: Governance Participation Program, Status: implemented

SIP 141: Formalize the responsibilities and role of the grants DAO, Status: implemented

SCCP-133: Increase volume partner rewards to 10K SNX per, Status: vote pending

Be sure to check out our Weekly Recap Podcast!

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