Why SynFutures is Better than Synthetix in DeFi Derivatives
About SynFutures
SynFutures is an upcoming derivatives protocol, currently in V1 Closed Alpha phase. The team is a combination of crypto natives and Wall Street top guns, with the idea to build a solid infrastructure for future DeFi derivatives on Ethereum and other L2/side chains. Last week, SynFutures announced $14mn Series A funding led by Polychain Capital with participation from Framework, Pantera Capital, Bybit, Wintermute, CMS, Kronos, and IOSG Ventures. Earlier 2021, it announced a seed round backed by Dragonfly Capital and Standard Crypto.
You can visit the website to register for V1 Closed Alpha early access. or join discussions on Medium / Twitter / Telegram / Discord.
It’s the Product!
DeFi is about building a revolutionary and democratic digital financial infrastructure for the future. In the crypto derivatives market, there are a few well-designed protocols that have garnered attention and popularity across the ecosystem. These protocols allow for the trading of synthetic versions of digital and/or real-world assets, giving investors exposure to the underlying asset as opposed to the real thing.
Synthetix has been a market leader in digital asset derivatives trading, but contains several key flaws that limit its usage.
Disclaimer: I love Synthetix governance. I support Kain.
It promises ZERO SLIPPAGE, which is a Trojan with unlimited downside risk. Many of those who traded on Synthetix have actually sold a put option without knowing, without receiving the put option premium from the transaction.
In financial markets, nothing really comes for free.
Using Bitcoin as an example, traders use “zero-slippage” Synthetix protocol, or other dApps trading Synths, to take BTC directional delta risk only, yet the sBTC would lose value if SNX drops significantly, causing sBTC liquidations and sUSD losing its peg (like a few other unbacked fiat stablecoins already did).
In such a scenario, purely due to the price drop in SNX, every trade (long or short, leveraged or unleveraged) would collapse, regardless of external oracles. This represents the SNX put option a Synthetix trader implicitly sold, in exchange for “zero slippage”. As the SNX token has such high volatility, traders will have sold an expensive put option while remaining completely unaware of this.
Traded Price vs. a Peer-to-Pool Mint.
Inspired by the AMM (automated market maker) pioneer Uniswap, and optimized with solid financial engineering, SynFutures employs its very own sAMM (synthetic AMM)that is tailored to best suit the derivatives market (read more about it here).
SynFutures offers critical underlying features, such as transparency and 24/7 availability. Every price is TRADED, just like in a professional financial market — this means there is a real supply-and-demand equilibrium with actual monetary value behind every displayed price.
A minted asset with its price being constantly transmitted through an external oracle price feed, on the other hand, has no financial meaning at all — its price is FAKE. This drives DIRECTIONAL risk exposure on SNX stakers far beyond your typical impermanent loss. Directional risk is best suited for directional traders who are able to handle these types of swings. However, stakers’ activeness in governance by no means indicates they are comfortable with active financial risk-taking.
Implode with Deleverage or Grow with Leverage? Your Choice.
To maintain the sUSD peg with SNX, a 450% c-ratio is put in place. This results in DELEVERAGE and a low capital return — for every $1 of capital that is deployed, about $0.20 is actually used to generate income.
Even major banks like Wells Fargo and the Agricultural Bank of China do better than this.
With SynFutures, LPs (liquidity providers) only need to use a single-token to supply liquidity. Examples of currently supported assets are ETH, DAI, USDC, USDT. 100% of your capital is deployed to generate income, and traders have the option to use up to 10x leverage when executing trades.
List Your Own Derivative in 30s — I Didn’t Mean Days/Weeks.
On June 5, 2021, the SIP-133 vote by Spartans to add $DOGE to Synthetix’s list of token offerings began — a few days later on June 8, the proposal was approved. To this day after a month has passed, $DOGE still hasn’t been available to trade. This is not being caused by a flaw in Synthetix’s governance process, but by the overall shortcomings of the product itself.
Try listing your own derivative in 30 seconds on SynFutures. Here is the guide. It’s easy, extremely fast, and permissionless — SynFutures is here to make the experience as seamless as possible.
What is your view?
You can visit the website to register for V1 Closed Alpha early access. or join the discussions here on Medium / Twitter / Telegram / Discord.
