A new financial primitive enabling the creation of synthetic assets, offering unique derivatives and exposure to real-world assets on the blockchain. #DeFi
Describe the Synthetix project and its goals.
Synthetic assets, or derivatives, were first developed in the traditional finance industry. There are a number of benefits to trading synthetic assets. Firstly, they can be tailored to suit traders' different requirements, i.e. options or short instruments. More importantly for our report today, synthetics can give access to markets that other traders cannot access. To give an example, banks that have access to restricted stock markets can structure and sell a synthetic asset that mimic holding the physical stock itself, acting as the counterparty.
The ultimate goal for Synthetix is to one day offer all types of real world assets, including stocks, bonds, real estate, and so on.
Synthetix is a platform that allows trustless, on-chain issuance and trading of synthetic assets called Synths, which currently include synthetic cryptocurrencies and commodities;
SNX stakers earn fees and inflationary rewards in exchange for providing the essential function of maintaining sufficient levels of collateral to absorb Synth price fluctuations;
The protocol's debt pool mechanism can be difficult for new users to understand, which could lead to unintended risks and losses;
Synthetix Exchange gives users unlimited liquidity and no slippage on trades up to the value of SNX collateral in its systems;
The SNX token's inflation scheme is well-designed to give active participants a decent incentive to help the system grow;
Although our view of the protocol is positive in general, there are significant risk factors at play, namely price oracle risk, insolvency risk, and extreme SNX volatility
Initially, the Synthetic project was created as Haven by current CEO Cain Warwick and launched in 2017. But in 2019, after DeFi appeared on the market, a rebranding took place, and the project already received its current name and corresponding functionality.
Synthetic was originally known as Haven and held its ICO around February 2018 for its ERC-20 token, HAV. The price of 1 HAV is 0.67 USD. The goal at the time of launch was a decentralized payment network that uses a dual token system to issue stable coins (nUSD) backed by HAV as collateral. HAV holders were then rewarded with a percentage of the commission received from all usd transactions as a result of maintaining nUSD stability.
Moving forward, the team realized that they could do much more than just create a stable coin. A major rebranding to Synthetix was announced on November 30, 2018, and HAV became SNX.

Synthetix is a decentralised synthetic asset issuance protocol built on Ethereum. The essence of a synthetic token is that it copies the price of an asset from the real world, transferring it to the Ethereum blockchain and providing Synthetix with all the properties of the ERC-20 token.
These synthetic assets are collateralized by the Synthetix Network Token (SNX) which when locked in the contract enables the issuance of synthetic assets (Synths). This pooled collateral model enables users to perform conversions between Synths directly with the smart contract, avoiding the need for counterparties. This mechanism solves the liquidity and slippage issues experienced by DEX's. Synthetix currently supports synthetic fiat currencies, cryptocurrencies (long and short) and commodities. SNX holders are incentivised to stake their tokens as they are paid a pro-rata portion of the fees generated through activity on Synthetix.Exchange, based on their contribution to the network. It is the right to participate in the network and capture fees generated from Synth exchanges, from which the value of the SNX token is derived. Trading on Synthetix.Exchange does not require the trader to hold SNX.

Synthetix is a protocol for issuing and trading synthetic assets on Ethereum. Each synthetic asset (or Synth) is an ERC20 token which tracks the price of an external asset; for example each sUSD token tracks the price of the US dollar (and unlike the other synthetic assets, is fixed at 1). A wide variety of Synths exists within Synthetix, including fiat currencies, cryptocurrencies, commodities, and inverse indexes. In principle the system can support any asset with a clear price, and provides on-chain exposure to an unlimited range of real-world assets.

Synthetix is otherwise composed of a smart contract infrastructure and a set of incentives which maintains Synth prices. It is underpinned by the value of the Synthetix Network Token (SNX). SNX acts as collateral; staking a proportional value of SNX is required to mint Synths. Stakers are rewarded for supporting the system with a pro-rata share of the fees generated by activity in the system. The value of SNX is thus directly connected with the usage of the network it collateralises.

This mechanism allows Synthetix to support instantaneous, near-frictionless conversion between different flavours of Synths without the liquidity and slippage issues experienced by other decentralised exchanges. The resulting network of tokens supports an extensive set of use cases including trading, loans, payments, remittance, eCommerce and many more.

What is a synthetic asset?
Synthetic assets allow you to receive the benefit of holding an asset without actually holding it. Before going any further, many people would want to stop you here and ask why. Why would you want to hold a synthetic asset instead of just holding the asset itself?

There are many answers to this question, but the fundamental reason people hold synthetic assets is that they receive some benefit over simply holding the underlying asset. The benefit could be access, such as in the case of gold where someone wants exposure to gold without having to deal with custody. It could be liquidity, where someone wants to be able to easily enter and exit a position that would be difficult to do with the underlying asset.

But in our case the answer is very simple, people will want to hold on-chain synthetic assets because they get the benefit of holding the underlying asset plus all of the advantages of a decentralised platform.

2. How does the governance DAO support these goals?
Today, the project is managed through the work of several decentralized organizations (DAO):
Responsible for protocol upgrades and smart contracts
Funding and developing the project community
Which finances organizations involved in the development of the network
Organization consisting of designated community members whose role is to participate in other protocols to expand the influence of Synthetix
The Synthetix protocol management system consists of two main elements:
Spartan Council
The Spartan Council is an elected body consisting of 7 nominees who will receive more votes from SNX holders during the voting process. Voting for candidates for members of the Spartan Council takes place every 3 months.
Synthetix Proposals
Protocol change proposals (SCCPs - Synthetix Configuration Change Proposals and SIPs - Synthetix Improvement Proposals), which are sent to the SIP repository on GitHub. In order for the proposal to be accepted, a majority of the Spartan Council members must vote for it.
All discussions regarding project management begin in the #governance channel in Discord.
After preliminary discussions in Discord, more formalized proposals get to the Synthetix Research Forum.
To view current offers, users can visit the Synthetix SIP Interface.

Management resources:
Discord Discussions: All Synthetix management discussions begin in the Synthetix community in Discord on the #governance channel.
Research Forum: After a heated discussion in Discord, more formalized opinions regarding the management and improvements of Synthetix are retained in the research forum https://research.synthetix.io/
SIP Website: To view or create suggestions for improving Synthetix (SIP), visit the Synthetix SIP interface.
3. Describe your first experience upon entering / engaging with the DAO for the first time.
Where was project information located?
How did you figure out where to go for answers?
Links to basic information about synthetic were on the project's website. On synthetic's Twitter, I watched the latest news about the project.
Was it easy or difficult to locate and engage with moderators and other helpful community members?
Interaction with the moderators was as simple and relaxed as possible. I easily found out all the information from the Moderators in the Discord when I needed help
How did entering the DAO make you feel?
When I first entered synthetic, I quickly got used to it thanks to a convenient and thoughtful interface, as well as a strong section with information about the project
What sorts of things could you immediately do in the DAO? Were they useful?
At synthetic, I managed to quickly use the Stacking and Trading section. These sections were useful, it's a great opportunity to increase my capital.
What attracted you to the DAO in the first place?
I was attracted by the friendly and slightly futuristic design of the site and interfaces as well as the active and responsive community in Discord
Does the DAO have a formal onboarding process?
Yes, it took me a little bit to get used to the location of the main work areas, as well as a little insight into the essence of the project before I started using it. But when these stages are passed, the use becomes relaxed
4. Describe the organizational structure of the DAO.
Organizational structure of the Synthetix DAO
At the moment, there are about 32529 participants in the Discord community, on twitter 175.7K Followers.

Seek out technical and non-technical contributors from the ecosystem
Provide a safe and open space for the community to discuss external governance proposals and suggestions.
Stay reasonably accessible to the Synthetix community through Synthetix's official channels of communication. (Mainly Twitter and Discord). Conduct Spartan-City-Halls (AMAs) in the official Synthetix Discord to bolster engagement and knowledge sharing between the community and protocols selected by the community or the ambassadorDAO.
Ambassadors are the governing body of the Synthetic Protocol, which is responsible for ecosystem management, partnership and ecosystem management.

Synthetix Ambassadors enable community token holders to delegate their ERC-20 tokens from other projects (yCRV, BAL, UNI, etc) in order to participate in external protocol governance that benefits the Synthetix Ecosystem (liquidity incentives, synth listings, etc)

The Synthetix DAO will allocate a stipend to incentivise Synthetix Ambassadors to perform their external governance duties.

The new Synthetix Ambassadors governance portal is now live, brought to you by the Synthetix grantsDAO! The Synthetix Ambassadors program provides a simple way for SNX holders to delegate their governance voting rights in other protocols (e.g. Aave, Compound, Uniswap, etc.) to a committee of ambassadors focused on furthering the interests of the Synthetix community within the DeFi ecosystem. This allows the Ambassadors to have more say in supporting governance actions on behalf of SNX stakers, such as setting Curve gauge weights, adding SNX or Synths added as collateral on lending platforms, and so on.

Grants DAO
GrantsDAO consists of five community members and a team that will review SNX grant proposals that contribute to the project. This is an important milestone for the project, as it marks the first phase of the transition to decentralized governance.

The dual purpose of creating GrantsDAO is to ensure greater transparency and decentralization of the project. All offers will be available for public viewing at https://snxgrants.io, which means that the community will be able to immediately see all the proposals that have been accepted and rejected, as well as those that are under consideration.
Core Contributors
A decentralised cluster of autonomous teams that are paid a stipend by the sDAO and support the Synthetix Protocol via a variety of development and non-developmental roles (i.e marketing, design, development etc).
The Spartan Council.
The Spartan Board will be responsible for approving the proposed changes to the Synthetic protocol. Initially, this will only include SCCP (i.e. configurable changes on certain aspects of the protocol, such as changing the exchange commission or target C-Ratio), but the goal is also to include SIP (i.e. more complex protocol changes) in the protocol. future.

Council members will vote for SCCP on the website gov.synthetix.io . Discord also has a Board channel where board members can openly discuss topics, but it is read-only for anyone who is not a member.
Protocol DAO (pDAO)
The Protocol DAO (pDAO) is the DAO is an organisation which operates out of a Gnosis multi-signature wallet. The wallet is assigned as the owner of the Synthetix Protocol core contracts, which makes the pDAO responsible for upgrading and releasing new contracts on behalf of the Spartan Council.

Members of the pDAO are appointed to be signers of the Gnosis multi-sig by the Spartan Council, who use a strict criteria to identify who is eligible to become a pDAO member.

The Gnosis multisignature wallet address that the pDAO operate out of is 0xEb3107117FEAd7de89Cd14D463D340A2E6917769
General stages of the DAO
Setting up smart contracts. At this stage, the basic rules are defined and prescribed in smart contracts. This is the most important stage for creating a sustainable DAO, since initial errors or shortcomings may weaken the project in the future or completely close it.

Financing. To get started, the DAO requires funding from the interested community. Smart contracts assume the creation and distribution of some form of internal property. For example, a project token that serves to grant voting rights.

Deployment. After successful financing, all further decisions are taken by vote. As a result, the DAO operates independently of the creators or a centralized authority. And the interested community chooses the most profitable direction of the project development.

The Inaugural Treasury Council
The Treasury Board was created to take over many of the responsibilities of the now-dissolved SynthetixDAO. This was one of the last remaining areas of centralization, and this transition marks the end of an important but opaque function that synthetixDAO performed as a proxy for the previous basic structure.

The Treasury Board was directly elected by token holders, with 4 members selected using a method similar to SIP-104 (minus the square formula). The elected members will serve for a certain period (3 months) and may be nominated for re-election if they wish.

Why create a treasury board?
SynthetixDAO was the last component that could be considered illegal under the DAO-based approach. The transfer of decision-making rights to the community makes it possible to completely decentralize management. As token holders control the treasury, we are becoming more vulnerable and less at risk of protocol hijacking.

An additional advantage of the Treasury Board is the ability to connect with the best and brightest minds regarding the allocation/management of capital. Having a dedicated team focused on these responsibilities will undoubtedly improve the Treasury's risk-adjusted "performance."

Finally, the separation of the powers of the Treasury Board from the Spartan Council ensures the existence of checks and balances in the management system and guarantees a more even distribution of responsibility, while all management bodies are accountable to token holders and each other.

Most of the responsibilities of synthetixDAO are currently handled by the Treasury Board, with the exception of specific management decisions of the main participants, which are described in SIP-161. The Treasury Board is responsible for the following

Treasury management (including approval of OTC and strategic transactions)
Management Scholarships
Financing of the Committee of main participants
Provision of budgets for DAO grants
Financing of operational costs for the DAO protocol
Issuance of discretionary incentives

The main task of the Council is to provide resources for the growth and expansion of the protocol. This includes treasury management in such a way as to ensure continuity of funding for protocol costs (in-network/out-of-network), management plus CC scholarships, ecosystem incentives including grants, DAO funding, and other discretionary incentives. The specifics are to some extent open to Council members, but as it develops, in addition to the mandate, some general guidelines will be introduced as a way to reduce unnecessary risk and create a level of consistency between eras.
5. What are the responsibilities of the DAO toward the project?
The Synthetix DAO is the DAO responsible for managing the treasury of the Synthetix protocol, its sole role is to ensure that the governing bodies of Synthetix remain interested in supporting the content and future development of the Synthetix ecosystem.
Transition to decentralized governance. Synthetic aims to be a decentralized system.
Synthetic has every opportunity to become a project that transfers control from the main team to the token holders.

The goal is to bring the protocol to the point where it will be resistant to capture, whether by a nation state or an individual attacker.

The purpose of this transition is to remove central points of control and thereby ensure the protocol cannot be censored or captured. The value of decentralised systems is the ability to coordinate distributed users with a clearly defined set of rules. The more immutable these rules the more confidence network participants can place in the protocol. Thus every central point of control is an attack vector on trust in the system, but each aspect of control has trade-offs. Because as a general point the more decentralised each component is, the harder it is to coordinate to change. So it is critical we assess not just the value of decentralising a component but also the timing. By removing central control for a given aspect of the protocol too early, we put the entire project at risk. This is a delicate balance, but we must start somewhere.

Currently, the main team performs the functions of keepers. Token holders do not have the right to remove or transfer aspects of control right now. However, although suboptimal, this is not terrible, since the only correspondence between all token holders is the value of the network, which is represented by the SNX token. The Fund does not benefit from online activity, except by storing SNX tokens. By design, there is no privileged position for any particular object in the network. In addition, all members of the core team are token holders, so the SAS token represents the success potential of the project for all participants.
Points of centralisation
There are multiple aspects of the project that must be decentralised, the list is below:
Legal and operational structure
1. Legal entities
2. Treasury management
3. Grant distribution
Protocol changes
1. Code
2. Parameter tuning
3. Cryptoeconomic/Monetary changes
Product improvements
1. Price feeds
2. Asset selection
3. Interface work
Synthetix currently operates as a not for profit foundation domiciled in Australia. The pattern of using a foundation to coordinate protocol development goes back to early 2013 with the inception of the Mastercoin foundation. Like many early crypto patterns this was in hindsight a suboptimal solution. Yet because robust DAO frameworks did not exist a foundation was one of the only viable ways of providing confidence in the project. The Ethereum Foundation is probably the most well known crypto foundation, and while it does a lot of great work, is definitely not the optimal solution for coordinating Ethereum public goods, and it is particularly poor when it comes to organisational transparency. Some of this is likely due to attempts to prevent capture, but the outcome is less transparency and more community frustration than if the Ethereum Treasury was coordinated via a DAO.

There are now multiple robust and feature rich DAO solutions available so the use of not for profit foundations for coordination has become more of a liability than a benefit. It is likely that most crypto projects will transition from foundations to DAOs over the next few years. It will take only a few successful examples for this transition to accelerate and we intend for Synthetix to be one of those successes.

There are two fundamental aspects of this transition. The first is migrating control of the treasury to a modern DAO framework (SynthetixDAO), the treasury is currently controlled via a proto-DAO that funds various entities in the Synthetix ecosystem including the Foundation in Australia. Upgrading to a modern DAO is a work in progress, but we expect it to be completed in early 2020, once we have details we will share them with the community. One aspect of this transition is there will be multiple independent entities providing services to the DAO, but critically none of these will have unilateral control over protocol governance. In practice this will look like multiple distinct and independent teams all funded via grants from the SynthetixDAO to perform critical functions for the protocol.

The second aspect is the governance of the SynthetixDAO. This is far more challenging than coordinating movement of funds. I have stated previously I believe pure on-chain governance is fundamentally flawed and will lead to far more project risk than the risk of a foundation being captured. So it is imperative that the cure not be worse than the disease. The solution is for SynthetixDAO V0 to act as a custodian, essentially a similar role to that of the current proto-DAO. SynthetixDAO V0 will have a small number of members with equal voting rights. Members will be initially be constituted with major SNX stakeholders, but will evolve to include other key token holders over time.

Eventually the SynthetixDAO V1.0 will be established, and the timing of this will be coordinated via the existing rough consensus process used for all SIPs. The exact structure of this DAO is to be determined, but there is a view that a mechanism similar to representative democracy will be employed. This will allow token holders to signal using their token holdings for a specific DAO member. All votes by all members will be available for review and if token holders are dissatisfied with the positions taken by a member(s) they can withdraw their signal and the member will be removed. It is also critical there is a time delay between votes to ensure that token holders have time to respond to any votes that they perceive to not be in their interest.

In addition to treasury management, we expect to establish a separate grantsDAO which will accept grant submissions from the community and disburse funding. This will ensure that grants payments are transparent and under the oversight of the community. The members of the grantsDAO will be removable by token holders if there is a perception they are not performing their duties. We expect the grantsDAO members to be mainly made up of community contributors.
Protocol Changes
Changes to the protocol are currently implemented by the core team after input from the community via the SIPs process. We are working on a new mechanism that will ensure protocol changes are processed by a protocolDAO. At present there is a multisig mechanism controlled by the core team that enables upgrades. This protocol control will soon transition to an upgrade contract, changes to the contracts will be published on-chain and verifiable by the community to ensure they align with the SIP process. The upgrade contract will be owned by the protocolDAO to ensure that all contract changes go through the proper governance process.

Parameter changes are already governed by the SCCP process, however changes are implemented via the contract owner. Given the binary nature of parameter changes we believe we can transition this process on-chain to allow token holders to directly modify parameter changes. This will allow for fairly rapid changes in emergencies since there will not need to be a time delay.

Cryptoeconomic changes are also governed by the SIP process, but as we decentralise governance further it will become harder to make changes to aspects of the system like the monetary policy. This is why it is important during the early stages of the project to rigorously debate these policies to ensure that the community is as close to full consensus as possible. This has played out well with the recent changes introduced by SIP-23 and SIP-24.
Product Improvements
We believe there is a distinction between the protocol and the "product." The contract architecture supports the products, but ultimately Synthetix.Exchange is just one product that exists on the protocol. We are already seeing other implementations of the exchange functionality being built directly on the contracts that do not rely on Synthetix.Exchange. This will be the evolution of the project as many product implementations compete for users with better interfaces and functionality. Eventually there may even be distinctions between which assets a specific implementation supports. In that sense, Synthetix.Exchange is really just a proof of concept that demonstrates the power of the protocol. It is likely to remain the most used in the short term, but like other protocols such as Uniswap, it is expected that the majority of exchange volume will eventually come from other dApps and interfaces. This is a sign of a healthy ecosystem, including developer engagement and community belief in the system design.

A critical aspect of this is to ensure the price feeds the protocol consumes are not a single point of failure. The transition to Chainlink will ensure the community can request any required price feed from Chainlink nodes and the nodes can provide it independently without any central coordination. Once a price feed is available, a SIP can be raised to integrate it into the protocol. This will open up the possibility of many more classes of assets, including equities, indices and even exotic derivatives.

Both Mintr and Synthetix.Exchange are open source and the community is free to make changes and submit PRs, however, the core team maintains these repos and has control of which PRs are accepted. We must ensure the front end interfaces are accessible anywhere and that there is not a single point of failure. There are a number of solutions to this that are currently available and we expect that community frontends will be one of the areas incentivised in the future via the grants process.
In order for Synthetix to deliver on its potential it must become an open and unstoppable protocol. But further, we must ensure that it is not just robust against attack, but antifragile. It must gain from being attacked. We have seen this play out this year with frontrunning bots. Each wave of frontrunning attacks improved the system and made it stronger. We must extend this to every aspect of the protocol. Once the project has reached the point where it improves with each new attack we will no longer fear attempts at censorship but welcome them, as each attempt will ensure the protocol is more resistant to capture.
6. How are community members incentivized to participate in the DAO?

Transition to decentralized governance. Synthetic aims to be a decentralized system.
Synthetic allows users to receive two main types of rewards:
· Synthetic allows users to receive two main types of rewards:
· Stacking rewards paid by inflationary monetary policy are nominated in SNX

In addition, Synthetix uses "secondary" incentives to balance and develop individual elements of the ecosystem. These incentives are paid either from the inflationary component or from the SynthetixDAO Treasury. For example, additional SNX can be paid to participants of liquidity pools containing Synths in various third-party protocols, such as Curve, Balancer, Uniswap, etc.

Sources of Value
Exchange Fees
Exchange fees are generated whenever a user exchanges one synthetic asset (Synth) for another through Synthetix.Exchange. Fees are typically between 10-100 bps (0.1%-1%), though usually 30 bps, and when generated are sent to the fee pool, where it is available to be claimed proportionally by SNX stakers each week.
SNX Staking Rewards
SNX staking rewards are generated through the inflationary monetary policy implemented in March 2018. At the same time as they claim their exchange fees stakers can claim their staking rewards, which are escrowed for a year. The SNX staking rewards enabled by the inflationary supply are set to decrease gradually until September 2023, where it will become a 2.5% annual terminal inflation rate.
Staking Requirements
The information below presents collateralization ratio (CR) requirements that will help stakers earn SNX rewards and avoid liquidations, as well as other relevant information.
L1 Requirements
Initial CR required for staking: 400%
CR Under 200%: Staker can get flagged for liquidation, has 3 days to fix CR ratio to 400%
Claiming Period: stakers need to claim rewards on a weekly basis
Minimums: No minimum amount, recommend to do above 10,000 SNX because of L1 fees
Rewards Escrow: 1 year
L2 Requirements
Initial CR required for staking: 750%
CR Under 200% : Staker can get flagged for liquidation, has 3 days to fix CR ratio to 750%
Claiming Period: stakers need to claim rewards on a weekly basis
Minimums: No minimum amount
Rewards Escrow: 1 year
Secondary incentives
In addition to the two primary forms of incentives, Synthetix also runs various incentives to create on-ramps, balance out particular dynamics, or trial different behaviour. These are either paid with a portion of the weekly inflationary SNX when implemented at the protocol level, or with SNX from the synthetixDAO treasury if they are just trials.
sUSD/DAI-USDC-USDT liquidity on Curve
Amount: 6,000 SNX per week
Supplied by: SNX inflationary supply
Duration: Mar 13, 2020 — ongoing
Pool: Curve sBTC/renBTC/wBTC
Staking Contract: StakingRewardssUSDCurve
Source: Curvepool (via Unipool)
Aim: This incentive aims to provide an on-ramp into trading on Kwenta for traders with stablecoins.
Deprecated incentives

iETH holders
Amount: 16,000 SNX per week
Supplied by: SNX inflationary supply
Duration: Apr 24, 2020 — ongoing
Pool: None (iETH is staked directly)
Staking Contract: StakingRewardsiETH
Source: iETHRewards
Note: the source file above was modified on L13 before deployment to use the iETH proxy address
Aim: This incentive aims to help reduce the impact of sETH holdings on the SNX stakers' debt pool by incentivising people to hold iETH.

Shorting rewards
Amount: 8000 SNX per week for each asset (sBTC and sETH)
Supplied by: synthetixDAO
Duration: Feb 5, 2021 — Apr 20, 2021
Pool: None
Staking Contract: ShortingRewardsETH & ShortingRewardsBTC
Source: ShortingRewards)
Aim: This incentive aims to balance out the global debt pool, which has recently been heavily skewed toward sBTC and sETH, and in the context of a bull market this skew represents a significant risk to SNX stakers.
sTSLA and sUSD liquidity pool on Balancer
Amount: 4000 SNX per week for 5 weeks
Supplied by: synthetixDAO
Duration: Feb 12, 2021 — Mar 19, 2021
Pool: Balancer sTSLA/sUSD
Staking Contract: StakingRewardssTSLABalancer
Source: StakingRewards
Aim: This incentive aims to provide a secondary market for sTSLA tokens outside of traditional market hours, as during these periods one cannot trade into sTSLA using the Synthetix smart contracts.
sUSD and DHT (dHedge) liquidity pool on Uniswap
Amount: 3000 SNX per week for 10 weeks
Supplied by: synthetixDAO
Duration: Mar 11, 2021 — May 20, 2021
Pool: Uniswap sUSD/DHT
Staking Contract: StakingDualRewards
Source: StakingDualRewards)
Aim: This incentive aims to provide liquidity for DHT, the governance token of dHedge protocol, which supports Synthetix through generating trading volume.
iBTC holders
Amount: 16,000 SNX per week
Supplied by: synthetixDAO
Duration: Oct 27, 2020 - Mar 9, 2021
Pool: None (iBTC is staked directly)
Staking Contract: StakingRewardsiBTC
Source: iBTCRewards
Aim: This trial aims to help reduce the impact of iBTC holdings on the SNX stakers' debt pool by incentivising people to hold iBTC.
sETH/ETH liquidity on Uniswap v1
Amount: Initially 5% of the weekly inflationary SNX, then 64,000 SNX per week, then progressively less.
Supplied by: SNX inflationary supply
Duration: Jul 12, 2019 - Jun 26, 2020
Pool: Uniswap sETH:ETH V1
Staking Contract: StakingRewardssETHUniswapV1
Source: Unipool
Aim: This incentive aimed to provide an on-ramp into trading on Synthetix.Exchange for traders with ETH. sETH was chosen over sUSD because these two assets should always trade at parity, and shifts in the price of ETH against USD do not require arbitrage.

sBTC/renBTC-wBTC liquidity on Curve
Amount: 10,000 SNX and 25,000 REN per week, distributed via Balancer BPT tokens in a shared Balancer poo
Supplied by: synthetixDAO
Duration: Jun 19, 2020 - Aug 28, 2020
Pool: Curve sBTC/renBTC/wBTC
Staking Contract: StakingRewardssBTCCurve
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the Unipool contract to make it re-usable.
Aim: This trial is providing the SNX component of a SNX/REN liquidity pool (along with Ren Protocol) to help generate rewards for the sBTC/renBTC/WBTC liquidity providers on Curve.
sXAU/USDC liquidity on Uniswap v2
Amount: 8,000 SNX per week
Supplied by: synthetixDAO
Duration: May 30, 2020 - Jun 27, 2020
Pool: Uniswap sXAU:USDC V2
Staking Contract: StakingRewardssXAUUniswapV2
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the Unipool contract to make it re-usable.
Aim: This trial aimed to test demand for sXAU (synthetic gold) and trial Uniswap v2, which was recently released.

SNX/USDC liquidity on Balancer
Amount: 8,000 SNX per week
Supplied by: synthetixDAO
Duration: Jun 5, 2020 - Jul 3, 2020
Pool: SNX 90%/USDC 10%
Staking Contract: StakingRewardsSNXBalancer
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the Unipool contract to make it re-usable.
Aim: This trial aimed to test Balancer as a means for providing extra SNX liquidity, as well as trialling the recently released Balancer protocol.

Value Recipients
SNX Stakers
SNX stakers stake their SNX and receive two kinds of rewards: exchange fees and SNX staking rewards. But by staking, they also take on the risk of 'debt.' When someone stakes their SNX, to then immediately unstake it they need to burn as much sUSD as they just minted — this sUSD figure is their debt, and all SNX stakers' debt is pooled together (with each staker holding a proportion of it). But this pooled debt is also where profits and losses from people trading on Synthetix.Exchange is represented, so a staker's debt can change over time depending on traders' overall profits and losses. This is the risk they assume when staking their SNX.
ETH stakers
It is also possible to mint Synths by staking ETH. However, ETH stakers' debt is denominated in ETH rather than sUSD. It does not get added to the system's pooled debt, and thus does not fluctuate depending on traders' outcomes. However, there is a 5% APR to stake ETH, as well as a small minting fee.
Traders on Synthetix.Exchange can take advantage of the system enabled by SNX stakers, namely trading a wide variety of assets with infinite liquidity and no slippage. They do not need to stake or even hold SNX.
L1 Requirements
Initial CR required for staking: 400%
CR Under 200%: Staker can get flagged for liquidation, has 3 days to fix CR ratio to 400%
Claiming Period: stakers need to claim rewards on a weekly basis
Minimums: No minimum amount, recommend to do above 10,000 SNX because of L1 fees
Rewards Escrow: 1 year
L2 Requirements
Initial CR required for staking: 750%
CR Under 200% : Staker can get flagged for liquidation, has 3 days to fix CR ratio to 750%
Claiming Period: stakers need to claim rewards on a weekly basis
Minimums: No minimum amount
Rewards Escrow: 1 year
The primary opportunity for arbitrage in Synthetix is taking advantage of underpriced assets on the secondary market. If sETH or sUSD are ever trading below the price of ETH or USD respectively, then stakers can profit by purchasing them cheaply and using them within the Synthetix system, where their values do not take the market rate into consideration.
Bug Bounty
Synthetic offers bug bounties for its smart contracts (not minor issues related to UI/UX or website domains).
7. How are proposals submitted, debated and implemented?
Council members will vote for SCCP on the website gov.synthetix.io . Discord also has a Council channel where council members can openly discuss topics, but it is read-only for anyone who is not a member.
Synthetix Improvement Proposals (SIPs)

The SIP is an artifact used to describe proposed changes to the core Synthetix Protocol. They can be authored by anyone and feature the motivation, technical specifications and rationale behind design decisions relating to the proposed idea.

SIPs are used as an artifact by the Spartan Council who is responsible for conducting interviews with the SIP author and debating on the implications of the SIP within the council chamber and also by the protocol DAO who is responsible for implementing the technical changes on the discretion of the Spartan Council.

SIPs live at their official site where anyone can see the status of SIPs and to find out more information about how to author one. Although anyone can author a SIP, it is ultimately up to the Spartan Council to approve and accept a SIP, all successful SIPs are granted a Synthetix Network Token reward.

Synthetix Configuration Change Proposal (SCCPs)
The SCCP is an artifact which follows the same authoring and review process as the SIP, except the contents of the SCCP contain proposed changes to existing parameters of the system. As a result of this, SCCPs commonly reference a SIP that is deployed on the Synthetix Protocol.

SCCP's live on the same site as the SIPs official site but follow a slightly different specification.
SIP/SCCP interviews
As a part of the Spartan Council role, interviews are conducted between the SIP/SCCP authors and the Spartan Council in order to discuss the implications and design choices of a proposed change to the Synthetix Protocol. The public nature of these interviews provides a transparent way for the community members to understand the changes being proposed and also safeguards the system through having more accountability within the decision making process.

These interviews are recorded and publicly available on spotify.
Governance Resources
Discord discussions: All Synthetix governance discussions begin in the Synthetix community Discord in the #governance channel.

Research Forum: After rough discussion occurs in Discord, more formalised opinions regarding governance and improvements to Synthetix are stored in the Synthetix Research Forum.

SIP Website: To review or create Synthetix Improvement Proposals (SIPs), visit the Synthetix SIP interface.

8. How does voting work and in what way is it 'weighted?'

Members vote on the website https://gov.synthetix.io/
An integral part of the Synthetix Governance Process is the DAO election process. To prevent a stagnant governance system, the different DAO's have specific epochs in which the members operate within.

At the end of each epoch, the community conducts an election via snapshot's IPFS infrastructure as specified in SIP-90 where the participants staking to the Synthetix Protocol are assigned a weighted-vote in which they can delegate to the member they'd like to see on the DAO.
Community Governance Call
Once a month, the DAO's collectively host a community call on discord which is a public forum in which the DAO's give an overview of their work and provide an open-environment for community members to express their opinions to the governing bodies directly. These governance calls are recorded and hosted on youtube and spotify.
SIP/SCCP interviews
As a part of the Spartan Council role, interviews are conducted between the SIP/SCCP authors and the Spartan Council in order to discuss the implications and design choices of a proposed change to the Synthetix Protocol. The public nature of these interviews provides a transparent way for the community members to understand the changes being proposed and also safeguards the system through having more accountability within the decision making process. These interviews are recorded and publicly available on spotify.

Spartan Council - Election Flow
1. An election is created on the snapshot-space or on the staking website with the nominations gathered on the nomination sheet.

2. Once the election is completed, the SC-NFT must be revoked from ex-members and issued to new members of the Spartan Council.

3. To enable Dilution, the relevant information from the election must be logged into the CouncilDilution contract, to do this, there is a script avaliable on synthetix-scripts

4. Once the NFT is distributed, the holders will be entitled to vote on SIPs/SCCPs under the snxgov.eth space, when the CouncilDilution is updated with the latest election hash onchain, voters are able to dilute members whom they have voted for per proposal.
grantsDAO - Election Flow
1. An election is created on the snapshot-space or on the staking website with the nominations gathered on the nomination sheet.

2. Once the election is completed, the gDAO multisig must be updated with the new owners and the old owners must be removed.
ambassadorDAO - Election Flow
1. An election is created on the snapshot-space or on the staking website with the nominations gathered on the nomination sheet.

2. Once the election is completed, the gDAO multisig must be updated with the new owners and the old owners must be removed.
9. What tools / frameworks / platforms is the DAO using?
Synthetix powers decentralized perpetual futures, options markets, deal coordination markets, and more.
The first completely decentralized options protocol.
Kwenta Trade with up to 10x leverage and simulated liquidity for the best price fills. Coming soon.
A binary options protocol for trading on price action, sports, and other events.
Many platforms already leverage the deep liquidity and composability of Synthetix to deliver better trades with lower slippage, hedging, and other unique use cases.
10. What are the biggest challenges for the DAO currently?
Smart Contract Risk
Like all decentralized applications build on program m able blockchains, Synthetix removes custodial risk and replaces it with smart contract risk, where users could lose funds if attackers find any vulnerabilities. For example, two attacks occurred in February 2020 on the DeFi lending platform bZx, where an attacker or attackers manipulated the price oracle. This allowed the attacker(s) to borrow much more than they were supposed to be able to, leaving bZx lenders with combined losses of almost US$1 million.
Especially Reliant on Price Oracles
Though this point is related to the previous one, we feel it deserves a special mention. The core functions of Synthetix all depend on price oracles to deliver external price data reliably, and most importantly, without egregious data quality issues. An attack on Synthetix occurred in 2019, showing how sensitive Synthetix is to the quality of price data. A trader was able to manipulate the price feed of KRW, which allowed him /her to generate unlimited profit at the expense of SNX holders. After a series of trades, this trader made a profit of US$1 billion in less than an hour. Fortunately, the trader agreed to forgo his profits in exchange for a bug bounty since he was unable to cash out his profits. After the incident, Synthetix integrated decentralized price oracle Chainlink in December 2019. Although a step in the right direction, we have seen that Chainlink also has susceptibilities - on Black Thursday in March 2020, the oracle's price feeds for ETH went down for six hours due to network congestion.

Complex and Potentially Counterintuitive
As you have seen in our report, the Synthetix protocol is not very easy to understand. The debt pool and pooled counterparty mechanism result in some strange economics between SNX stakers, which if not w ell-understood could result in losses which would otherwise have been avoidable. For example, stakers m ight believe that m inting sUSD, a stablecoin, is safe since only USD risk is assumed. In reality, however, they are exposed to the price movements of all other Synths in the debt pool. An add-on to this point is that being a SNX staker and sUSD m inter entails active maintenance of Synth holdings and collateralization levels. In return, they can earn fees generated on the exchange and inflationary rewards w ithout taking undue market risk
Inherent Instability of Native Token as Collateral
In Synthetix, the SNX token acts as both collateral and as the equity token whereby stakers can earn fees generated from the platform. As we noted in the diagram of this virtuous cycle of user growth leading to higher fees, this could boost SNX valuation when platform grow th is expected to be high. However, the flipside is also true. If growth expectations fall for any reason, internal or external, this can quickly lead to a vicious cycle whereby lower user growth leads to lower SNX valuations.

Because of the potential for positive and negative feedback loops, the volatility of the SNX token is extrem elyhigh, with standard deviation of 157% annualized in USD terms. What this means is that it is possible for an external event such as a disastrous crypto market crash or an attack on the platform to cause system insolvency.
No Liquidation Mechanism
Theoretically, the above would not be such a big issue if Synthetix had a liquidation mechanism whereby the system could be protected from insolvency. This would help to deleverage the system before a state of under-collateralization can be reached. However, no such apparatus exists yet, though in the team 's credit, one is being worked on.
High Collateral Ratio
The com bination of both SNX volatility and the lack of a liquidation mechanism means that the collateral ratio for SNX stakers must be set to extremely high level of 800% in order to minimize the risk of system insolvency. This is obviously undesirable from the perspective of stakers, who need to stake a large amount of capital to only be able to m int a small fraction of that value in Synths. Because the maximum potential supply of Synths is so limited by the collateral ratio, in our view this unnecessarily limits the market cap of Synths, and by extension, the growth of the protocol as a whole. Hopefully the collateral ratio can be lowered once a liquidation mechanism is implemented.
Current risks
There are several risks in the current architecture, as Synthetix is still an experimental system and complex systems require both empirical observations and theoretical analysis. Empirical observation and theoretical analysis ensure the mechanism design aligns incentives for all players.

One risk involves the debt SNX holders issue when they stake their SNX and mint Synths. As previously explained, this debt can fluctuate due to exchange rate shifts within the system. This means that to exit the system and unlock their staked SNX, they may need to burn more Synths than they originally minted.

Most people in the cryptocurrency space are aware of this risk, but the prices of most cryptoassets are highly correlated to Bitcoin and/or Ethereum. This means it's possible for major price fluctuations in the SNX token to occur for reasons that have little to do with SNX or the Synthetix system.

Finally, there are a number of aspects of the system that are currently centralised. This decision has been made to ensure efficient implementation of the project. One example of centralisation is the use of proxy contracts across much of the architecture. This is to ensure the system can be upgraded easily but confers a level of control to the engineering team which requires trust from users. While these aspects will be phased out over time, it is important to understand the risks inherent in the current system architecture.

Risk mitigation strategies
As a decentralised protocol, the Synthetix team is committed to decentralisation and censorship resistance — this will be a gradual process as the system matures. This includes crucial areas such as our price feeds. We have previously announced a partnership with Chainlink, a provider of decentralised oracle solutions.

Another important area is governance, we have recently initiated regular community governance calls to ensure the project's goals are aligned with the community. Another aspect of this process is a move to a formal change management process, we have introduced SIP's (Synthetix Improvement Proposals) to allow the community to introduce change requests and to ensure that any changes to the system are well understood and considered by all stakeholders.

Although Synthetix looks very futuristic and has a number of unique advantages that can be useful to many people around the world, there is still a big risk associated with the fact that it is still under development, and there are no guarantees of its growth and success in the long term.
For users, there is a very real risk that in the future they will have to burn more synths than they have released in order to unlock their SNX. There is also a risk that some competitors may strengthen and overtake Synthetix.

Among other risks, it is worth mentioning Synthetix's dependence on Ethereum and the current centralization of the project.
The platform also needs reliable price channels for all synthetic assets minted and added to the Synthetix exchange. If there is no way to reliably track the price of an asset without manipulation, the entire system will be vulnerable to fraudsters.
It was the lack of reliable price channels that limited Synthetix to major currencies, highly liquid cryptocurrencies and commodities such as gold and silver.

Regulatory changes may also occur in the future that will affect Synthetix. Some countries may classify Synth tokens as securities or derivative financial instruments, as a result of which they will fall under all the rules and laws governing these types of assets.
11. What is this DAO doing particularly well?

Theoretically Unlimited Liquidity/ No Slippage
Because of the way Synthetix Exchange is designed, users are able to freely convert between Synths without slippage costs, with the only limitation on trade size being the total value of outstanding Synths. As long as there are enough SNX stakers to collateralize the system, users will be able to find liquidity.
Well-Designed Token Economics
As we mentioned in the prior section, one of the main issues the Synthetix team faced was how to grow the protocol while protecting the system from insolvency risk. The solution to use token inflation as a multi-pronged tool to incentivize SNX stakers and encourage more liquid external markets in Synths could likely succeed in bootstrapping user growth.
Trustless On-Chain Exposure to Any Asset
Synthetix has seemingly managed to solve the problem of creating trustless, tokenized versions of real-world assets w ithout having to actually holding these assets in reserve. Traditionally, only centralized token issuers could tokenize assets such as gold and silver. Theoretically, any asset can be traded on Synthetic Exchange as a Synth, as long as price feeds are available. Eventually, this could include assets such as stocks, bonds, and real estate.
Open Source and Autonomous
Just like other DeFi protocols, Synthetix's code is open source and available for anyone to inspect. This gives users transparency and allows for flaws in the code to be found by knowledgeable members of the public. It also allows for the code to be forked and/or improved in case the protocol's operations orgovernance are somehow compromised. Furthermore, Synthetix will continue to operate in its current state as long as the Ethereum network is functional. This is in contrast to centralized service providers, where users are locked out if the system is down for whatever reason.
Nice Prices And Gifts
Our prices are fixed for some standard services and we offer discounts for regular clients. Also, we ask our new clients about their birthday and prepare cool presents.
Effective Services
We care about our clients' time and can help you every day. Just call us — and we will help you with all the questions.
12. What needs to be significantly improved?
Make a Synthetix use case with a light interface to be convenient for more users.
Create video instructions for beginners to make the use of the project more understandable.
Create more interesting activities for the Community to increase user engagement in the project.
13. What was your overall impression of the 'health' of the DAO's community?

Our general impression about the DAO community is that it consists of a large number of technically competent specialists who have high knowledge in cryptography, Blockchain and in the creation of Decentralized organizations. Due to the fact that there is no entertainment content in the form of contests and memes in the community, the project audience is more focused on studying the project and improving it technically.
14. What can Eco learn from the way this DAO is structured? What should we definitely avoid?
To present to the structure a more formal process in which the community participates in making important decisions on improvements and changes in the ECO system. For example: "ECO improvement proposal":
Any member of the community can compose, present and promote "ECO improvement proposal"
After "ECO improvement proposal"is sent, the team will discuss it in order to bring the proposal to the ideal state in which, in their opinion, it can work and be implemented.
The team will discuss "ECO improvement proposal" and its compromises (if any) both within the company and with the community for implementation.
"ECO improvement proposal" defender and the team have reached an "approximate consensus" (without token voting at the moment) and an agreement that a specific "ECO improvement proposal" should be implemented.
After that, it will be transferred to one of the engineering groups for implementation through their current product development processes.
Legitimate leaders to lead the people delivering the protocol. The key is that people have to deliver code and other results, but those same people can't control the protocol. In order for the protocol to be sufficiently decentralized and resistant to capture, token holders must have control. This can be either directly or indirectly through delegated democracy.
While working on the project, we appreciated the availability of technical information and the convenience of posting it in the form of a blog. It would be great if, over time, the amount of information on ECO would be so informative, accessible and open to users.
andrey_512#9835 | Daria@8811
© 2021