Synthetix Quarterly Report — Q3 2022
Quarterly Report for Synthetix, Quarter 3 of 2022: July — September.
Let’s start with the highlights, shall we?
⭐ Spartan Council/CCs: Merge Execution & V3 Audit
⭐ Grants Council: Wrapper UI & SIP/SCCP Submission Site
⭐ Ambassador Council: 2 extra seats & Uniswap Governance Proposal
It’s that time again! We’re here to recap another exciting quarter for the Synthetix protocol and community. As always, the epoch was not without its ups and downs. But to kick things off on a positive note, let’s take a quick look at the best of Q3 and the impact that this last epoch will have on the protocol moving forward.
The biggest event of the epoch was the successful Ethereum merge to the beacon chain, finally completing the transition from proof-of-work to proof-of-stake. This achievement was one for the wider crypto community, but directly benefits all of the protocols building on Ethereum. Out of an abundance of caution, many protocols announced plans to pause activity just prior to the event with plans to resume functionality following some critical system checks after its completion. Synthetix was no exception, and careful planning for this critical moment in the protocol’s history paid off. The contracts were unpaused after just 6 hours without any major issues to report.
Also at the top of everyone’s mind this epoch was V3. We got to hear multiple presentations from Afif, Ethernaut, and Noah about the initial scope, some tentative milestones, dates to look out for, and the SIPs they’re pumping out at a staggering pace. The major highlights are the redesign of the staking process and a new proxy architecture. SIPs 302–305 describe what we understand as staking in V2 and were written looking towards a possible multi-collateral future with permissionless pool creation — pending governance approval, of course. The updated proxy architecture also represents a major improvement with the potential to help reduce the complexity of implementation dramatically.
The Grants Council was hard at work this epoch leveraging community talent to help improve the protocol and ecosystem. After working for a few months, the team was able to deliver their promised (and much-anticipated) Wrappr UI. Previously, anyone who wanted to make use of this feature would need to interact with the contract directly, but the goal of this project was to add a functional frontend to the wrappr contract that was deployed nearly two years ago. The Grants Council also funded another frontend development project to improve UX for SIP and SCCP submissions. The new interface allows community members to easily submit governance proposals like never before. The objective was to reduce friction in governance participation by automating and standardizing as much of the process as possible.
Lastly, the Ambassadors kept the pressure on this epoch, sometimes hosting 2 community calls a week to chat with other protocol leads about exciting new offerings. Just before the elections, they proposed the addition of two Ambassador Council seats, justified by the increase in governance activity they have taken on since the original mandate. The SCCP was ultimately approved by the Spartan Council and there are now five Ambassadors sitting on the Council for the first time this epoch! Another huge achievement for the Ambassadors over the past 3 months was the deployed Uniswap governance proposal to add a 1bp fee tier on Optimism. It was an outstanding, collaborative effort to get this one pushed through and really demonstrated the reach of the Ambassadors within the ecosystem.
A partnership with Jump Crypto was announced to the community early on this epoch, which fell within the scope of the Treasury Council but sparked an interesting discussion regarding transparency at the limits of governance. While the Spartan Council maintains accountability in the community via protocol changes with a chance for the community to dilute votes, the Treasury Council is not subject to the same check on their decisions. Kain was very vocal that this freedom for such a body to be nimble and act in the best interest of the protocol during crisis is essential and, ultimately, stakers can still show disapproval at election time.
As many of you may recall, during the turmoil at the end of last epoch and the beginning of this one, the C-ratio was lowered to 300% to ease pressure on stakers. As the smoke started to clear, support was building to return the C-ratio to previous levels. Gauntlet, a community risk management partner, joined weekly sync calls periodically over the course of the epoch to present data and make recommendations to the Spartan Council.
As a result of their recommendations, the C-ratio was raised to 350% late last epoch and eventually 400% — following an SCCP presentation and vote of approval. There was, however, more resistance among Council members to raise the C-ratio to 450%. Some argued that the increases coupled with other factors could have a negative impact on the protocol. And at the end of the day, Gauntlet’s function is to make recommendations based on a very limited number of variables, while the Spartan Council must consider the cumulative effects of every decision.
There was also the great meta-governance debacle of 2022. TerraBellus proposed 2 SIPs and an SCCP, all with the intention of holding non-participating Council members accountable by adding the potential for dismissal. The issue, however, was that these SIPs were inspired by non-participation, and meta-governance proposals require a unanimous decision (with 100% participation) to pass. At the very least, the exercise highlighted a potential griefing vector in the old definition of unanimity and luckily, the whole council was eventually on board in correcting the issue.
All the buzz at the end of the last epoch was the news that 1inch had integrated atomic swaps and therefore routed considerable volume through Synthetix. About a month ago, it was discovered that a couple big traders had been successfully frontrunning this, making use of the very low fees offered by atomic swaps. Some Core Contributors immediately got to work proposing a series of SIPs meant to address the issue.
Overview of Synthetix Q3 Stats: July 2022 — September 2022
Q3 2022 Spartan Councilors: Afif, Burt Rock, Danijel, Ethernaut (Ale), Kain, ksett, SynthaMan, TerraBellus
Along with their contribution to the achievement of major Synthetix milestones this epoch, let’s take a minute to review everything else the Spartan Council was able to achieve in just the last 3 months.
A lot happened in July, as things were starting to look up after a brutal May and June. Like we mentioned earlier, the protocol was finally in a place where the Spartan Council deemed it appropriate to raise the c-ratio back up to 400% based on recommendations from Gauntlet.
The sUSD bridge was finally enabled — this was a custom implementation of the Optimism bridge that allows sUSD holders to move from Ethereum Mainnet to Optimism almost instantly. However, also like the Optimism bridge, the standard transfer time back to L1 is seven days. sUSD was also added as collateral on AAVE, meaning that for the first time, users could borrow other assets against sUSD holdings on Optimism, furthering the use case for the stable coin.
August saw two releases go out. The first was the Tiaki release at the beginning of the month, which implemented SIP-258 to account for trade directionality in Atomic Swap pricing. The whole epoch, CCs made it clear that one of their top remaining priorities for V2 was to improve atomic swaps and Tiaki was another step on the way to delivering on that promise.
The Muhlifain Release also went out in August and added a universal circuit breaker, a debt ratio futures market, and BNB/DOGE/XMR/OP perpetual futures markets. The universal circuit breaker update represented more elegant for oracle validation and will be capable of supporting different oracles in the future with limited input.
The main driver behind adding the debt ratio futures market was to allow for capital efficient debt hedging. All of the new perps additions were brought forward by Burt Rock, who also plays a governance role with an ecosystem partner (Kwenta). Though the contracts for these new markets were approved and deployed in August, it wasn’t until early September that they had undergone enough testing to be unpaused. By the middle of the month, the last of them (OP) had gone live — just in time for the merge!
On September 15th, 2022, Ethereum finally switched to proof-of-stake after countless delays and challenges. There was quite a bit of discussion and planning that went into making the event successful and we are excited to see what’s on the horizon!
In terms of protocol updates/upgrades, this was a relatively quiet epoch. Compared to the last two where we saw major product deliveries and integrations from futures to atomic swaps, launching a few new perps markets was a bit underwhelming. 😉 What was happening behind the scenes though was a relentless effort towards a major system upgrade — V3! Throughout the epoch, it was clear that the CCs and Spartan Council were aligned on the mission to limit remaining V2X scope in favor of delivering what is expected to be a very impactful V3. This will now be the 2nd epoch using the V3 governance module, and V3 staking is expected as early as the end of this year. We will certainly be watching these developments closely and reporting on them as they happen!
Q3 2022 Grants Councilors: ALEXANDER, CT, cyberduck, JVK, Mike
The Grants Council has had a very successful epoch searching for ways to improve the protocol and vetting community proposals to get the best of the best.
- Retroactive grants
First off, the Grants Council has distributed SEVERAL retroactive grants this quarter. These grants have helped fund things like explainer and staking videos in different languages, more Dune Analytics dashboards, Twitter community engagement, Atomic Swaps, translations, and more. The community has really stepped up to help grow and bring attention to the protocol, and the Grants Council has not let this go unnoticed. Way to go!
- Fee Rebate Initiative
You may have seen back in August when the Grants Council announced that their $OP request was approved by the Treasury Council…well that was for this! They teamed up with Kwenta’s MarketingDAO this epoch to help drive volume to the Synthetic Futures product contracts and collect feedback from traders. They provided $OP tokens for referrals AND covered trading fees for whale 🐳 traders. This was based on market research from Kwenta that said, because of the zero-slippage model, larger traders are the user segment most likely to reap the benefits of using Kwenta. The Grants Council therefore funded this incentive program to help Kwenta form more connections with these traders.
- Explainer videos by Gabriel Haines & Drake on Digital
Did you get a chance to watch these vids?? If not, definitely check them out here and here. The Grants Council worked with and funded both of these content creators, who have helped explain Synthetix and spread the word about the protocol to their many followers.
- Wrappr UI
This one’s a big one! The much-anticipated Wrappr UI was published by the Grants Council this past epoch. After it was brought up during the gov-call in March, the Council immediately got to work to fund a UI for the various Synthetix Wrappr contracts. They got 2 developers to submit working designs for the site, and picked the best one to move forward with. The final product was shared in August, and it looks amazing. If you haven’t
seen it yet, head over to the site here. No need to interact with contracts directly anymore! Thanks GC ♡
- SIP/SCCP Submission Site
Wow, two incredibly useful tools in a row? What can’t these guys do. This new interface now allows anyone to EASILY create new SIPs and SCCPs, all you need is a Github account. The Council has also been taking feedback on this site in order to add new features, such as an autofill feature for the SIP/SCCP number field which now automatically populates based on the next available number. They are also continuing to improve it, with hopes of adding an edit feature for version 2 of this app.
- Attendance & Participation Report
You guys liked it, so we published another one for this quarter. With the help of the Grants Council, SNXweave gathered voting and attendance data from the last 3 months and assessed participation from each of the Councils with a 360-style review. By providing data on attendance records, voting patterns, and peer-to-peer feedback, this report has proven to be a very useful tool for voting and has added to the transparency of the protocol. For the next report, the Grants Council has called upon the Treasury Council to participate in this review. We also welcome feedback on the 360-review portion of the report, as we aim to make it as effective as possible.
- SNXweave Weekly Recaps & more
Our favorite section 😉 Our team has closed off another great epoch of working closely with the Grants Council to bring you the weekly news in both blog and podcast form. This epoch, SNXweave published 13 Weekly Recap blog posts & 13 Weekly Recap podcasts, with our content also on YouTube. We of course had the pleasure of hosting another Live Spartan Council Election Panel, where we had several first-time panelists!
And now, we’re finishing the quarter off strong again with another Quarterly Report to tie the epoch up in a neat bow. 💙💙💙
What’s next for the Grants Council?
There are always more things brewing, here are just a couple:
- HERO Stats Page
This is SOOO close to being published. The Grants Council has been working with designer Jade on this site for a while, and they are working hard with the CCs to make sure it is displaying 100% accurate data.
- NFT Project
Yup, you guessed it, we saved the best for last! This project is getting so close to its final stages, we are literally on the edge of our seats. The Council has given us another set of leaky leaks to share, CHECK THESE OUT! The design part of this project is just about complete, so the team has been focused a lot on the mint side of things and the lore.
Q3 2022 Ambassador Councilors: mastermojo, Matt, MiLLiE
The Ambassadors have outdone themselves again this quarter, smashing their Key Performance Indicator (KPI) goals at every turn. We’ve broken down the epoch by KPI again, so let’s review each of them:
✅ Spartan Spaces
1. Atomic Swaps & 1inch (82 listeners, Length: 1 hour)
- Guests: Kaleb and Kirill. Kaleb, of course, works for Synthetix on the product-side, focusing on optimization and market fit. Kirill joined 1inch in 2020 and is the lead backend engineer for 1inch, and started crypto through hackathons — 15 of which he has won with his team.
- As we all know, 1inch is a DEX aggregator. Kaleb also explained how atomic swaps was proposed and implemented as a solution to the latency caused by swaps previously on Ethereum (which were done using Chainlink as the oracle price feed).
- Recording rugged — sorry! 😓
2. Kwenta (40 listeners, Length: 1 hour)
- Guests: Andrew and Jeremy. Andrew has been in crypto for a few years, working on a variety of different projects. He started at Synthetix 2 years ago, and helped spin Kwenta off into its own project. Jeremy also started at Synthetix, as a frontend engineer, and is now the lead dev at Kwenta.
- Kwenta is a decentralized derivatives trading platform, live on Optimism, offering real-world and on-chain synthetic assets using the power of the Synthetix protocol.
- Recording here
3. Pool Together (62 listeners, Length: 1 hour)
- Guest: Leighton, who is the co-founder of PoolTogether and has been in DeFi full-time for 3 years.
- PoolTogether is a protocol for prize savings that allows users to pool their deposits in order to generate conservative yield, which is then pooled and redistributed as prizes.
- Recording here
4. Lyra (36 listeners, Length: 1 hour)
- Guests: Mike, Nick, and Cody. Mike is the co-founder of Lyra, along with Nick, and has worked with Synthetix previously as a contract engineer. Nick has a background in equity options before making the jump to crypto. Cody leads growth and community initiatives at Lyra, and previously worked with a number of traditional startups.
- Lyra is an L2 native options protocol and AMM that allows users to buy and sell options where sUSD is used as collateral.
- Recording here
5. OpenOcean (50 listeners, Length: 35 minutes)
- Guest: DM, who is one of the ecosystem developers, has been in crypto for 2 years, and has been following the space since 2017.
- OpenOcean is a DEX aggregator that seeks to deliver the best trading prices to users by taking advantage of liquidity across multiple DEXs.
- Recording here
6. Thales (39 listeners, Length: 1 hour)
- Guest: Padzank, who is the strategy lead at Thales and has been around the Synthetix community for a while.
- Thales, one of the first Synthetix spin-offs on Optimism, is a decentralized protocol that allows users to take part in peer-to-peer Parimutuel Markets on Optimism and Polygon.
- Recording here
7. Polynomial (56 listeners, Length: 35 minutes)
- Guests: Gautham and Abhishek. Gautham is the founder of Polynomial and does product lead, and Abhishek is a frontend dev.
- Polynomial builds automated strategies combining options and futures.
- Recording here
8. Socket/Bungee (Length: 40 minutes)
- Guest: Rishabh, who is one of the co-founders of Socket and handles the business side of the operation. He is also very passionate about startups and launching products from scratch.
- Bungee has been live for 8 months and is an application on top of Socket that allows users to swap assets between chains. Socket is the liquidity layer and bridge aggregator technology that enables Bungee transfers.
- Recording here
9. Granary (46 listeners, Length: 1 hour)
- Guest: Justin, who explained that Byte Masons began in late 2020 as an Ethereum security mentorship group, where mentees slowly became business partners which led to the launch of reaper.farm.
- Granary itself is a lending platform focused on providing the best value for the customer. They are more focused on the community and lowering rates, and less focused on profit for the protocol — essentially building Granary with the same ethos as a DeFi credit union.
- Recording here
10. dHEDHE (35 listeners, Length: 1 hour)
- Guests: Ermin and Jake. Both are Core Contributors at dHEDGE with focuses on smart contracts, but Ermin also helps with business development and Jake with engineering.
- dHEDGE is a decentralized asset management platform that originally launched on ETH Mainnet and is currently also deployed on Polygon and Optimism.
- Recording here
1. SCCP-230: Increase number of serving Ambassadors (authors: Matt, mastermojo, Millie)
- The much-awaited SCCP to increase the number of Ambassador seats to 5! Once it was approved, this was implemented immediately and 5 Ambassadors were voted into Council this epoch. This is an exciting new change that should make the Ambassador Council even more powerful and efficient!
✅ Governance Power
1. Deployed Uniswap 1bp fee tier on Optimism with help from GFX Labs
- 54,000 UNI vote power (increase of ~20,000 from the previous epoch)
- 137 unique delegators
2. Fast bridging support for SNX and sUSD on Hop Protocol
3. Active voting in GearBox Governance
- 14 million GEAR vote power (increase of ~12 million from the previous epoch)
4. New Multi-sig wallet for OP governance
- 157,000 additional $OP delegated
5. Increase sUSD supply Cap on Aave on Optimism
6. Participation in OP Governance
Projects the Ambassadors have been in contact with due to OP Governance:
- Bankless Academy
- Across Protocol
Grants Council referrals — video content:
1. Drake on Digital
2. Kevin Söll
- Community users now have the ability to QUICKLY get SNX to Optimism using their Coinbase/Binance account
- Increased the AAVE sUSD supply cap to 20 million for lending on Optimism
- Adding sUSD markets
What’s next for the Ambassador Council?
The Ambassadors are never sitting still, as they currently have many things in the works:
- Website (70% complete): This new Ambassador Council website will be FULLY transparent and let the community know what projects the Ambassadors are working on at all times. The website will also compile past Spartan Spaces, include a “delegate to us” button, explain how to integrate with Synthetix, and have several other valuable resources for community members.
- Notion Page: The SNX Ambassadors now also have an in-progress notion page, where they plan to outline all of their initiatives and allow the community to track their progress.
- SNX Ambassadors YouTube channel: This is also in the works, and will be where past Spartan Spaces get uploaded so the community can listen to them forever! In the meantime, you can also find these recordings on anchor.
In addition to these ongoing projects, the Ambassadors have also outlined some overall goals for the next epoch:
- Pursue further growth strategies and formal BD relations
- Explore opportunities to scale synth supply
- Increase presence in Optimism governance
- Expand influence in DeFi
Best Memes from Q3
The quarter of course wasn’t without humor, so here are our favorite memes from the epoch: