Julian's Notes
Synthetix
Introduction
Resources
How it Works
- Put SNX token into a liquidity pool and mint out sUSD (stable coin, e.g. like [dai])
- Use your sUSD to buy and sell synth tokens which follow the price of the chainlink oracles
- The total outstanding value in the system is considered debt and you as a SNX staker have to cover that debt So of all assets goes up (e.g. 1B --> 1.2B) the % ownership you had now requires you to pay off the debt accordingly. So if you bought in at 0.1% with $1M sUSD worth of SNX, now you need to go find $200k sUSD to cover the rest of the debt or you'll eventually get liquidated.
However, non-stakers can freely buy/sell and don't carry this counter-party risk.
# Method 1: Exchange (kwenta.io)
ETH --> sUSD (exchange) --> sXXX (exchange)
# Method 2: Stake
Get SNX on an exchange --> staking.synthetix.io (stake) --> sUSD (mint) --> sXXX (exchange)
Examples
- See examples 1 and 2
Example: total debt goes below collateral
| Step | Alice | Bob | Total Debt |
|---|---|---|---|
| ... | 350 SNX --> 50k sUSD | 350 SNX --> 50k sUSD | 100k sUSD |
| ... | 50k sUSD --> 1 sBTC | Holds 50k sUSD | ... |
| sBTC 50k --> 10k | 30k sUSD debt owed | 30k sUSD debt owed | 60k sUSD |
| ... | 10k - (60k * 50%) = -20k | 50k - (60k * 50%) = +20k | ... |
| ... | Needs to obtain 20k to give to Bob (either buy from someone else or stake more SNX to mint sUSD) | ... | ... |
Fine-print
- 750% collateraliation ratio (determined by community governance)
- Collateral must then be managed by burning sUSD (to unstake) if ratio goes below 600%
- Debt is shared amonst all participants in one big pool (sUSD)
- Controlled by 3 DAOs
- protocolDAO controls protocol upgrades and Synthetix’s smart contracts
- grantsDAO funds community proposals for public goods on Synthetix
- synthetixDAO funds entities advancing the network’s development