SynFutures: A hidden gem
Industry background
2020 will be remembered for the DeFi summer and the exponential growth in the usage of DeFi primitives such as spot DEXes and lending protocols.
As for the DeFi development in 2021, one of the main highlights will be the emergence of derivative DEXes. Namely, similar to how liquidity mining started DeFi summer and led to a 40x increase in TVL for DeFi protocols within 12 months, dYdX managed to bootstrap large trading activity using the token as the incentive.
At the peaks, dYdX alone managed to capture up to 8% of total derivatives daily trading volume, while generally speaking it accounts for only 2% of the crypto derivatives trading activity since centralized crypto derivatives exchanges are generating even up to $500B daily trading volume.
Thus, the market opportunity for derivative DEXes is still enormous.
Synfutures — permissionless synthetic assets AMM
Synfutures has the ability to support a broader range of products than centralized exchanges or order book DEXes since projects are free to launch derivative markets for their tokens, creating potential arbitrage opportunities between spot and futures markets as well as allowing communities to take leveraged exposure to the particular tokens.
Creating new markets only requires the provision of a single asset, and doesn’t require active position rebalancing, hence the experience for LPs is more simple than for the spot market. As a result, SynFutures enables the creation of markets with few natural market makers such as the Bitcoin mining difficulty index.
Moreover, SynFutures is not limited to crypto derivatives only. It can support derivative markets for any underlying as long as there is available price feed. However, oracle usage is minimized and the system relies on the price feed only for liquidations and settlement, allowing for price discovery to happen on the synthetic AMM.
Furthermore, it supports multiple collaterals i.e. leveraged position on the asset of choice can be opened using non-stablecoin assets as a margin e.g. ETH.
So in theory, using SynFutures it would be possible to support a pool where users could open up a long leveraged position on Bitcoin using ETH as a margin.
Organic growth
SynFutures smart contracts have been deployed on Ethereum mainnet, Polygon, Arbitrum, and BSC. Among these, the largest activity to date has been recorded on Polygon.
What stands out about SynFutures relative to other exchanges is the organic growth and retail-driven trading volume. Only on Polygon, SynFutures has attracted almost 20k unique users, while across all chains 50k unique addresses have interacted with SynFutures smart contracts.
As references, to this date, 50k addresses have interacted with dYdX Starkware version, while about 7k users have ever used the Perpetual Protocol xDai version.
The majority of the traders on SynFutures are classified as retail i.e. generating less than 10 transactions a day with a small number of bot trading addresses. The former group of traders, generally, is responsible for the large majority of the volume generated by the platform.
Recently, the average daily trading volume on Polygon has been fluctuating around 25M with about 2k daily active traders.
Conclusion
SynFutures v1 has nothing less but an impressive start, with a cumulative $1B+ traded on the platform, 50k unique users, and more than 100 underlying assets supported.
However, this is only a proof of concept compared to what is yet to come.
Cross margin, perpetual futures, impermanent loss hedger, and many other interesting features are yet to be introduced in the future iterations of the product.
Disclaimer: SynFutures is IOSG portfolio project.
🦄 About IOSG
IOSG Ventures, founded in 2017, is a community-friendly and research-driven early-stage venture firm with offices in China and Singapore. We focus on open finance, Web 3.0 and infrastructure for a decentralized economy. Our portfolio covers more than 60 projects, including Layer 1 (NEAR, Polkadot, Cosmos), DeFi (1inch, Synthetix, UMA, Dodo, Liquity, Gelato). We commit ourselves to work alongside various developer & DAO communities and helping the most aspiring founding teams to achieve success. As a developer-friendly fund with long-term values, we have launched Kickstarter Program which offers capital and resources for innovative and courageous developers. Since we consistently cooperate with our partners and connect with communities, we work closely with our portfolio projects throughout their journey of entrepreneurship.
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