People think they know Synthetix, and they kind of do - but that was v2, and no developers in their right mind would build anything for Synthetix v2. Thankfully, v3 is here and its different enough to require fresh thinking, and more blog posts. v3 is a totally different beast, not a marginal upgrade. New architecture, new premise and a fundamentally new offering: the liquidity layer for defi.
Markets rely on liquidity, and without it they suffer from the cold-start problem – not enough liquidity to attract users, and not enough users to attract liquidity providers (LPs). Synthetix v3 solves the liquidity cold start problem, as well as the liquidity scaling problem, across EVM chains.
Defi has a winner takes most dynamic, where the best swapping, lending and staking protocols take a significant majority of users, value and transactions. There’s no clear cross-chain winner in derivative liquidity, so if you think the same dynamic applies, you will understand why Synthetix v3 is such a big deal.
This post invites both OGs and interns to come and build on v3, and explains why you should. For more background information on v3, you can read the posts on how v3 is different to v2, and the steps to getting to v3 End Game. v3 is already mostly on mainnet, and now is the time to be building.
If you are a protocol or developer, consider building on Synthetix v3. You get all the building blocks to create your new product, as well as the pathways to existing and new liquidity. If you already have a product that needs liquidity, consider migrating.
LPs have provided more than $500m of cross-chain collateral for your protocol
LPs choose Pools, and Pools choose Markets → build a v3 Market and get chosen
Saying the quiet part out loud; v3 allows new protocols to be created and scale in a way that was previously reserved for the very well resourced, or brilliant first movers.
Soon Synthetix will begin migrating collateral from the v2 system to the v3 system, so Pools will have collateral to back new Markets, and LPs will be able to choose which Pools they collateralize → early Markets developers will have less competition
Currently new Markets require Spartan Council governance to approve → this will change once Permissionless Markets are enabled, undoubtably bringing more Markets to compete for liquidity
Create a new derivatives Market, or adapt your existing product
focus on the mechanics of your product instead of inefficient liquidity incentives
conform to the IMarket interface
Propose to Synthetix governance for your Market to be enabled
use this example (coming)
this step goes away once permissionless Markets are enabled by Spartan Council governance
Request some of the existing $500m+ Synthetix collateral for your market
request collateral from an existing Pool OR
create a new Pool (via governance) and attract Synthetix LPs to allocate to your pool
Your high performing Market will be attractive to Pools and LPs
Built by Synthetix Core Contributors and on mainnet, the v3 system is ready to start accepting collateral from the v2 migration system and new LPs. Once the migration is complete:
A liquidity layer that extends across chains, yet acts as one. Currently Ethereum and Optimism, and expanding to a few more EVMs per governance
$500m+ of collateral, $100m of stablecoin liquidity (in whatever we call this current market)
Currently SNX as collateral, with governance having the ability to enable other assets
Established governance that is expected to progressively make Markets and Pools permissionless
Developer/Protocol: builds a derivatives product that conforms to the Market v3 interface
Capital allocator/Pool Owner: creates a Pool, and choose which Markets to back. This set of primitives encourages an untapped role in defi - that of the collateral king
Both: Protocols can choose to be both, by creating a Market and a Pool to back it - using the best of Synthetix v3 without reliance on the Synthetix UI
The Market would be a v3 Market underneath, but could be presented in the protocol’s own UI
The Pool would be a v3 Pool underneath, but incentivized, controlled and presented by the protocol in their own UI
Over time a high performing Market would attract additional collateral from other Pools and LPs from the wider Synthetix ecosystem
Spartan Council Pool - the default Pool for new LP collateral and v2 LPs who migrate to v3
The Passive SNX Pool - Pool without market exposure, coming soon as per SIP-324
Others via governance and eventually permissionless - example draft SIP-327
Currently SNX is the only enabled collateral type for Synthetix v3
Spartan Council governance has the ability to enable any other asset
Pool owners have the ability to disable collateral types that have been enabled on the v3 system, but not enable new collateral types
Some Markets are built by Core Contributors, and both of these deserve their own post about integration opportunities:
Spot Market on L1 and Optimism
Perps v3 is in development (for Optimism)
And now its up to the ecosystem to also build Markets:
Overtime is coming, see below
[Your market here?]
The Oracle Manager is a stateless system which allows price data from multiple sources to be combined using a variety of strategies and reverts to be triggered (i.e. "circuit breaking") under various conditions.
Data from Chainlink, Pyth, Uniswap nodes can be combined into custom strategies using Nodes like Reducer, Deviation and Staleness. Let your imagination run wild, focus on the product and let Synthetix wrangle the oracles.
Check out the documentation for a full run down on the Oracle Manager capability:
Heres a UI for interacting with oracles from the Oracle Manager, and composing your own strategies:
v3 is an open source, (mostly, and soon, entirely) permissionless platform with unlimited opportunity for the community to build on and integrate. Some ideas and progress so far:
Stats: v3 dashboards have already started here
Automation: Gelato is coming🍦
Bots: LP liquidation for positions, Vaults and Pools; Perps v3 orders, liquidations and arbitrage; the list goes on…
Read the posts
Read the docs
Find Cav on Twitter for questions (and ethCC for croissants)
Are there incentives?
Synthetix Treasury Council has indicated they will be funding promising projects through STP-3 Synthetix Ecosystem Fund
Synthetix Grants Council may issue grants, but not to cover the entire cost of development or audits
The potential access to liquidity should be sufficient incentive alone
How hard is it to create a Market?
Technically what is required for my protocol to connect to the v3 system?
Create a Market that conforms to the IMarket interface
Create a proposal for Synthetix governance [template to come]
When will Markets or Pools become permissionless?
When will other collateral types be enabled?