TLDR:
The first epoch post SR-2 has reset Synthetix’s foundations, fundamentally changing almost all core aspects of the protocol.
The Synthetix pivot marks a transition from:
Solo SNX staking → delegated protocol staking
AMM derivatives exchange → CLOB derivatives exchange
Synthetix everywhere → An Ethereum Mainnet Perp
This last 6 months has been focused on establishing this vision and executing on setting it in motion.
The next epoch is about running hard at this vision and delivering on key initiatives to position Synthetix as a DeFi leader once again.
It’s been a hot minute since my last update. But every time I’ve tried to capture the latest developments, the ground shifts - new breakthroughs emerge, or what I’ve written becomes outdated before I hit send. This is reflective of the breakneck pace and scale of transformation taking place at Synthetix during the first Epoch following SR-2.
Following on from SR-2, we promised to revisit historical decisions made at Synthetix from first principles, rebuild trust, and deliver sweeping protocol changes to fulfill Synthetix’s mission: pioneering the most capital-efficient, flexible, and reliable decentralized derivatives markets. But very transparently - I vastly underestimated what that would entail. The vision of SR-2, “A Fresh Start”, assumed Synthetix had a solid product core that just needed better market delivery, relationships and that expanding to chains like Solana and Sui was the way forward. I was wrong.
Within a week of diving into Synthetix’s inner workings, three critical truths hit hard:
Staking was broken. It wasn’t just a clunky front end - the mechanism needed a complete overhaul to reduce protocol risk and deliver real value.
Synthetix had to own its products. We’d become overly reliant on integrators, diluting our control over the user experience.
Liquidity consolidation was non-negotiable. The dream of “Synthetix everywhere” crumbled as we realized bootstrapping liquidity on one chain was tough enough - let alone six, which we nearly attempted by December 2024!
Armed with these insights, we’ve pivoted with purpose, repositioning Synthetix as a market-leading designer, owner, and operator of decentralized derivatives products. We’ve made a very deliberate shift away from being a passive liquidity layer dependent on integrators’ success, and the results are already taking shape.
Over the last 6 months, the majority of our efforts have been dedicated to laying a robust foundation for Synthetix’s future. We are confident that these strategic initiatives will drive transformative results throughout the second half of 2025 and beyond.
Acquired Kwenta and TLX. This fast-tracked Synthetix into a B2C-focused protocol, giving us a dedicated front end, major upgrades to the trader experience (with more on the way), and the launch of several vault strategies (some in private testing).
Launched delegated staking (SIP-420). Legacy staking was a risk-laden, capital-inefficient system. The 420 pool is a game-changer, improving protocol health in the short term and setting the stage for sUSD to empower Synthetix products in the mid-to-long term.
Designed Synthetix v4. A central limit order book (CLOB)-style derivatives exchange on Ethereum mainnet, placing Synthetix at the heart of the most liquid and secure decentralized ecosystem.
This strategic shift has given Synthetix full control over the end-to-end user experience - design, delivery, and performance. For the first time in three years, our vision is crystal clear, and we’re charging toward it with relentless focus. Here’s the headline:
Perps are returning to Ethereum mainnet with Synthetix v4.
We’re a B2C protocol, owning the user experience, product roadmap, and priorities.
SNX is back at the core of the Synthetix machine, driving our ecosystem forward.
Synthetix has long been a trailblazer in DeFi innovation, but in recent years, our spark hasn’t burned as brightly as it once did. Reflecting on this, it’s clear that clinging to historical biases - approaches that thrived in 2020/21 - has held us back as the industry evolved beyond them.
Acknowledging this, the Spartan Council has spent the last six months rigorously overhauling Synthetix, clearing out outdated practices and setting in motion bold, fundamental changes to modernize the protocol. These efforts are designed to reignite our innovative edge and position Synthetix as a leader in the next era of DeFi.
The big Synthetix pivot primarily consists of the following:
SIP-420 revolutionizes Synthetix’s staking model, marking a significant step toward a more robust and capital efficient protocol. Under this new mechanism, stakers continue to lock SNX as collateral but no longer mint sUSD directly. Instead, the authority to mint and burn sUSD is delegated to the protocol, enhancing stability and reducing risk.
While the rollout of SIP-420 has encountered some initial challenges, primarily around the performance of sUSD, we remain confident in its transformative potential. As we navigate this transitional phase, the protocol is poised to fully realize the benefits of SIP-420, including a stronger, healthier sUSD and improved overall protocol resilience.
This brings about several significant benefits, including:
Capital efficiency. Given the volatility of SNX, Synthetix has historically had to maintain a 500% c-ratio to prevent bad debt accruing in the protocol. Under the delegated staking model where the protocol can prudently and transparently manage minted assets, we can be a lot more aggressive with the c-ratio, decreasing it to 200% (a 150% improvement to capital efficiency).
Tighter pegging (eventually). Under the old staking design, Synthetix has relied on individual stakers to manage peg stability (through minting/burning). When the protocol is in control, it can respond more reliably to supply/demand imbalances to tighten the peg.
More yield. SIP-420 will earn yield for stakers through deploying sUSD across v4 products, or deploying stablecoins across an array of yielding opportunities. This relatively conservative allocation can passively grow wealth for stakers, a far cry from punting it away on Synthetix Exchange (like myself!).
Systematic buy back potential. Yield generated can be used for buying back SNX.
Staking is at the core of Synthetix, it has been historically and it always will be. SIP-420 lays a critical foundation for Synthetix’s future, empowering our ecosystem to thrive in the long term.
Let’s be clear: AMMs (Automated Market Makers) can function for derivatives, but they’ve consistently fallen short in delivering the sustained performance and trader adoption needed to compete with centralized or decentralized CLOB (Central Limit Order Book)-style exchanges.
Synthetix has learned this lesson the hard way.
With Synthetix v4, we’re breaking free from the AMM model and launching a CLOB-style derivatives exchange on Ethereum mainnet. This shift aligns with what traders already know and expect—a familiar, high-performance trading experience akin to centralized exchanges. Synthetix likely took (years?) longer than necessary to reach this conclusion, swayed by AMMs' strengths (e.g. consistent market depth and the early success of innovations in v2x), plus the enduring success of AMM spot markets like Uniswap. Now that we're here, we're all-in on meeting traders' expectations with a CLOB, ditching the clunky, less effective AMM framework.
Benefits of CLOB-Style Trading Relative to AMM.
Enhanced Price Discovery. CLOBs enable precise, order-driven pricing, reflecting real-time market dynamics far better than AMM’s formulaic pricing models, which often struggle with slippage in volatile derivatives markets.
Price Precision and Flexibility. With CLOBs, traders can set specific bid and ask prices, enabling granular control over trade execution, supporting a wide range of trading strategies, including limit orders, stop-loss orders, and market orders. In contrast, AMM pricing relies on oracles and pool dynamics, often resulting in unpredictable execution and limited strategic options.
Familiar User Experience. Traders accustomed to centralized exchanges will find CLOBs intuitive, with visible order books and flexible order types (e.g., limit orders), reducing the learning curve compared to AMM’s less conventional interface.
Reduced Slippage. CLOBs match orders directly, minimizing slippage even during high-volatility periods, whereas AMMs often incur significant slippage on large trades due to their pricing curves.
Scalability for Derivatives. CLOBs are better equipped to handle the complex, high-frequency trading demands of derivatives markets, offering the speed and reliability traders expect, while AMMs struggle to keep pace.
Transparency and Fairness. CLOBs operate on price-time priority, ensuring trades are matched in a fair, predictable manner. AMMs, however, are vulnerable to manipulative practices like front-running and sandwich attacks, which can erode fairness and penalize unsuspecting traders.
Advanced Trading Strategies. CLOBs enable a range of advanced order types, such as iceberg orders, fill-or-kill orders, giving traders the tools to execute complex strategies with precision. In contrast, AMMs are limited to basic swap transactions, offering little flexibility for strategic or high-frequency trading.
Synthetix v4’s CLOB-based approach positions us to deliver a decentralized derivatives platform that rivals centralized exchanges in performance while maintaining the security and transparency of DeFi. This is the future of Synthetix - and we’re excited to bring it to life.
Synthetix has been down the L2 road - and we went all in. From Kain’s initial push to meme L222 into reality to launching on Optimism, Arbitrum, Base, and nearly deploying on Snaxchain, we explored every angle. But after deep reflection, we’ve reached a hard-earned truth: L2s are not the answer for Synthetix.
The L2 era is behind us - not because we couldn’t deliver, but because we’ve clarified what truly matters: credible neutrality, composable settlement, and trustworthy self-custody. These principles are the bedrock of decentralized finance, and they’re best embodied by Ethereum mainnet.
Ethereum Mainnet has leveled up the last few years, consistently producing blocks with sub-1 gwei base fees thanks to the adoption of L2’s and gas limit increases from 15M in 2021 to 36M currently (up from 30M in February 2025). Additional ability to scale L1 throughput is coming later in 2025 with the Fusaka Hard Fork (4x gas limit) and with EIP-9698 (100x gas limit increase to 3.6 billion over four years), set to supercharge capacity in the months and years ahead.
These are the reasons behind why Synthetix v4 is being built on Ethereum, where we can deliver a CLOB-style derivatives exchange that aligns with these core values.
By rooting v4 on mainnet, we’re ensuring:
Credible Neutrality: Ethereum’s decentralized ecosystem provides a level playing field, free from the biases or control of centralized platforms.
Composable Settlement: Mainnet’s robust infrastructure enables seamless integration with other DeFi protocols, enhancing Synthetix’s utility and reach.
Trusted Self-Custody: Ethereum’s battle-tested security guarantees that users maintain full control over their assets, fostering confidence in every trade.
Synthetix v4 marks a bold return to our roots, harnessing Ethereum’s unparalleled strengths to power a new era of decentralized derivatives.
Synthetix is 6 months into a transformative overhaul, shifting from outdated AMM and L2 strategies to a CLOB-style derivatives exchange on Ethereum mainnet with Synthetix v4. Recognizing past missteps, including over-reliance on integrators, inefficient staking, and fragmented liquidity, the Spartan Council has used this first epoch to reset the foundations and implement critical changes:
Acquiring Kwenta and TLX to become a B2C-focused protocol
Launching delegated staking via SIP-420 for improved protocol health
Designing v4 to offer transparency, fairness, and advanced trading features like precise pricing and sophisticated order types.
By returning to Ethereum for its credible neutrality, composable settlement, and trusted self-custody, Synthetix’s redemption path is set to return to being a market-leading decentralized derivatives platform.
The road ahead is exciting and we’re just getting started!