A new direction

This post will outline a new direction for Synthetix.

Last year, I realised Synthetix was making progress following the governance overhaul, but a more radical change was needed to return to greatness. So, I wrote SIP-420. The 420 pool is now open for pre-deposits.

I believe 420 is the best chance for Synthetix to leverage its strengths and carve out a place in modern DeFi. This post marks the start of my campaign to win back the hearts and minds of the SNX community and, soon, the entire Defi and crypto ecosystem.

Firstly, I will preempt the reply guys, and say, “Yes I know the price is bad”.

Bad price, bad project.

But the path to recovery is underway. This post will outline the plan to regain market awareness and exploit Synthetix's strengths. I proposed SIP-420 to solve the most critical deficit in the protocol. The collateral engine is broken. There is no incentive to stake SNX; nothing else matters until we fix this. I think SIP-420 offers a path to staking growth.

What is the 420 Pool?

It is a new staking model that removes most friction from participating in Synthetix staking. It creates a mechanism for the protocol to generate yield and alleviate past issues, including debt inflation. SNX is still used as collateral to mint sUSD, but rather than each staker managing their debt position, the entire debt is managed in a single pool. This allows us to defend the sUSD peg more effectively. It also allows us to farm yields from protocols like Ethena, who will be a launch partner for this new pool.

Holders deposit SNX into the 420 Pool, and the protocol mints sUSD against this SNX collateral. This sUSD is then swapped into yield opportunities like sUSDe. The yield accrues inside the pool and can be used to incentivise any aspect of the Synthetix ecosystem, it can also be used for SNX buybacks.

What we I got wrong

Before laying out the future of Synthetix, I want to recap what I think went wrong since 2020. While building Infinex, I realised many approaches we took to building during the early DeFi era were not scalable. The first three versions of Synthetix Perps failed to gain consistent traction because a pooled liquidity model for Perps is too inefficient. We made the trade-off between decentralisation and UX, and while that worked initially, it was highly susceptible to competitors making different trade-offs. Initially, this was dYdX and their CLOB on Starkware, but eventually, many competitors did a better job optimising UX. In 2023, this culminated in Hyperliquid.

We tried many things to address this, from lowering Oracle latency to adding new forms of collateral. In early 2023, Fifa and I even discussed a hybrid AMM/CLOB. Why did we not try this earlier? I honestly believe it was a regulatory risk. Progressive decentralisation is great, but over the last four years, creating a venue for off-chain order execution was considered too high risk, even for me. Onchain order matching was infeasible on EVM, and even where it has been implemented on Solana, it has failed to gain traction.

Focussing on amm-based perps made sense then, but it was a mistake in hindsight. Something I have learned while building Infinex is you can remove almost every requirement in DeFi except being non-custodial. Once you recognise this, competing against CEXs is possible. Hyperliquid has shown that implementing a centralised validator set is sufficient to overcome the technical limitations of providing a low-latency CLOB. With this architecture, they have replicated and even exceeded the order execution of CEXs. This is a non-trivial accomplishment. They deserve their success.

Attention is all you need

While Synthetix has never been great at marketing, we are great at community building. Through the 2018/19 bear market, we were among the few projects with an active and engaged community. Unfortunately, the market has significantly improved in the attention game. I have felt this viscerally when building awareness for Infinex. I have had to adapt to this new meta to ensure Infinex gained relevance and attention.

The current attention game has left Synthetix behind. Fundamentals do not matter unless coupled with attention and awareness.

SIP-420 offers a path forward that is both novel and uncontested. Synthetix has always managed to reinvent itself at the right moment when needed, whether it was moving away from a stablecoin platform after the launch of Paxos, TrueUSD and Circle in 2018 to launching the first yield farming and liquidity mining campaigns a year before DeFi summer.

Synthetix is uniquely positioned to carve out a place in the modern DeFi ecosystem by introducing the 420 Pool. The collateral engine at the heart of Synthetix is its greatest strength. Synthetix was born in a ZIRP world, but the world has changed, and Synthetix is ready to adapt and thrive in this new reality. While Maker was always positioned to explode in a world filled with interest-bearing RWA opportunities, Synthetix must reconstruct itself to take advantage of RWA and yield-bearing assets.

How Infinex can help

Infinex was born out of my frustration with the lack of adoption Synthetix perps had achieved. But it has evolved into something much bigger. Infinex is a platform that can bring complex yield strategies to a much wider audience. Something Synthetix never managed to achieve. Eventually, Infinex will bring onchain opportunities to the masses. We have already built the most magical swapping interface in crypto, which is continuously improving. Next up is Earn. We are searching for a core group of yield strategies, and the Synthetix 420 Pool is a great differentiator for Infinex.

Build what the market wants

I just returned from Consensus HK. One of the conversations that stood out was an OG Chinese Bitcoin whale saying, “Chinese users want high yield, low risk”.

While this is hilarious, it is incredibly insightful. Everything in crypto is high risk! So, if I offer you a crypto opportunity with 3% APY staking ETH, most people would think it is low risk, low return. But in reality, most retail users perceive ALL crypto yield as high risk. So now you are offering high-risk, low returns! The only way to overcome this is to provide higher yields. We understood this intuitively during DeFi summer. Offering 10,000% APY attracted millions in TVL. There is an argument our transition to the “real yield” narrative, of which I was one of the leading proponents, was too early. People come to crypto for high variance returns; if they want bond yields, they can buy them in TradFi. And yes, eventually, crypto will supplant TradFi, and we will offer low-yield yield and low-risk opportunities in the billions to large institutions, but we are not there yet! We need to return to the OG days of high variance yields and high variance returns.

What next?

Synthetix has paused everything to focus on taking SIP-420 to market. At some point, Synthetix forgot how to hype new launches. I have spent the last few weeks rebuilding this capability with a crash course in the new attention meta. The entire Synthetix community must be aligned and focused on the 420 Pool. We need to ensure we maximise attention, and that requires focus from everyone. One of the first things I will be doing is ensuring we kick off a buyback program for SNX. I’m convinced it is significantly oversold and that the treasury has more than enough funds to begin buying back SNX at these prices. The other advantage is buybacks can go straight into the 420 Pool.

Synthetix has invested so much in DeFi. It has an incredible history. It is time for the SNX renaissance.

I expect the 420 pool to cross $100m in TVL within the first 24 hours of launch. If we can pull this off and convince existing stakeholders to join the pool, the next step is to convince all SNX holders. We can return the staking rate to the ATH of 90%.

The goal of the 420 Pool is to acquire $1b in yield-bearing positions in the first six months. If we can do that and achieve 10% average yields, we will generate more revenue per month than the current market cap of sUSD today.

If you thought I would go to all this effort after selling all my SNX years ago, I have bad news for you. The rumours I pulled a Litecoin Charlie on SNX have been greatly exaggerated.

I will be the first whale in the 420 pool, with ~30m SNX (another 2m SNX coming tomorrow). This is the single largest SNX position outside the Treasury. But there are several other friendly whales ready to join the pool. Here is an approximate breakdown of the current SNX distribution.

One last thing. If this works, and I’m confident it will. I propose to expand the scope of the 420 Pool. No more alpha leaks, but if you thought sXRP was wild in 2019, 2025 will blow your mind.

Synthetix.