Synthetix commence debt pool merger to enhance liquidity and staking capabilities
Decentralized finance, or DeFi, protocol Synthetix (SNX) has announced that the rollout of its debt pool synthesis feature will take place Thursday from 9 p.m. to 11 p.m. UTC, which is expected to impact staking participants in two separate categories: SNX inflationary staking rewards and debt coverage.
Currently, Synthetix operates debt pools on two chains, the Ethereum mainnet and Ethereum layer 2 scaling solution Optimism, which have amassed a cumulative total value of $930 million and $157 million, respectively. .
The company has declared its intention to move to a “native protocol of optimism”, with one of its board members, kain.eth defend down this path, indicating Optimism’s vast potential for growth.
Regarding debt hedging – a derivative investment method designed to reduce asset exposure – it has been calculated that the total value of the two pools when merged equals sETH: 31% Short, sBTC: 25 % Long, sUSD: 27% Long, other assets: 11% Long, and sEUR: 7% Long.
Cointelegraph reached out to a Synthetix spokesperson for further insight into the specific method of merging an L1 debt pool with an L2, as well as the benefits and challenges that might arise during the process.
Using Chainlink oracles as the core consensus for total debt accumulation, they stated that “the amount of debt for all issued synths is calculated off-chain, then the value is pushed on-chain using Chainlink’s decentralized oracle network, which is read by Synthetix contracts on L1 and L2.
“Merging debt pools provides maximum liquidity across the protocol and [the ability to] efficiently transfer synths between multiple chains via cross-chain messaging, rather than relying on automated market makers…debt pool synthesis allows the protocol to have fungibility on both L1 and L2.
Have a nice debt pool summary day!
Starting later today, March 24, 21:00 UTC, the debt pools on L1 and L2 will be merged into one.
This paves the way for Synth Teleporters, where synths can be moved instantly to any chain and b/w fungibility @optimismPBC and main network
Be ready. https://t.co/JfcsR4DYEH
— Synthetix ⚔️ (@synthetix_io) March 24, 2022
In addition to enhancements for Debt Coverage, Synthetix is also implementing a long-awaited feature – originally offered via governance in May 2020 Sep 80 (Synthetix Enhancement Proposal) – to create a synthetic futures pool, with the native asset of the SNX network being the financial instrument.
Later in our chat, the Synthetix spokesperson commented on the diversification of assets that Synths currently replicates, to which they stated that “Synthetix has synths for multiple financial assets, including crypto and Defi tokens, forex and raw materials”, before revealing:
“We can deploy synths for any asset or instrument where we can guarantee a reliable feed. This opens the door to synths based on stock price action, volatility metrics, interest rates or other innovative mechanisms like our own debt pool.”