Founder interview with Kain from Synthetix
Kain we know that you run two startups; Synthetix, which is a synthetic asset platform built on Ethereum, and blueshyft, which is a network of over 1200 retail locations that enable cash transactions for digital services. Today we would like to discuss Synthetix and stablecoins.
But let’s start with the most simple question. Tell us about yourself — give us a quick introduction to your background. How did you get where you are today and what does your company do?
Thanks for having me guys. After having been involved in several startups in my twenties, I founded blueshyft five years ago, it’s become the largest cryptocurrency payment gateway in Australia, processing over two hundred million dollars in deposits since launch. I’m still CEO at blueshyft, as well as founder of Synthetix, which is a decentralised synthetic asset issuance protocol built on Ethereum.
Can you provide us a demonstration of Synthetix and Synthetix.Exchange?
Sure, so Synthetix runs a derivatives trading platform, Synthetix.Exchange, which is a bit like a DEX but has infinite liquidity and no slippage. Basically it offers peer-to-contract (P2C) trading, which lets users exchange one synthetic asset for another by converting it through the smart contract instead of with a counterparty. This is all made possible by users staking Synthetix Network Tokens (SNX) to mint synthetic assets. They then get rewarded with exchange fees generated by these exchanges.
What are the benefits of your system, and what it allows users/traders to do that they can’t do anywhere else on Ethereum or otherwise?
Synthetix.Exchange allows trading without liquidity or slippage issues, as the contract simply converts one synthetic asset for another. This allows users to trade various assets quickly and easily, including some that aren’t accessible on Ethereum, such as synthetic Bitcoin and synthetic gold, and even allows users to short certain cryptocurrencies that aren’t able to be shorted anywhere else.
We know that Synthetix pivoted from a decentralized stablecoin project (called Havven) to the decentralized synthetic asset trading platform you offer now. How did you come to understand the need to pivot in a startup?
Having worked in several startups over many years, I place a strong emphasis on market validation. Once you launch a product you’ve got a lot more data on the utility it offers than in the pre-product ideation phase. We quickly realised after launching the platform that a decentralised stablecoin would not be enough to generate traction in the market and that a wider range of synthetic assets would be much more powerful.
Great! Here is another question we have for you. According to recent cryptocurrency research by Diar, the market cap of USD-pegged stablecoins hit an all-time high, exceeding $4 billion. With the lion’s share of the volume taken by Tether — do you think something is preventing decentralized crypto-backed stablecoins from having the same success?
Ultimately I think that by this stage the market has decided that the liquidity offered by fiat-backed stablecoins is so crucial that it’s more important than decentralisation. Dai is a decentralised stablecoin with a lot going for it, but once regulated fiat-backed stablecoins arrived with major liquidity it was always going to be tough for decentralised competitors, which is one of the reasons we pivoted.
Since adding major utility to Synthetix.Exchange at the end of April, when you added synthetic ETH and BNB, as well as the ability to long and short those cryptocurrencies as well as BTC, you saw over $37,000,000 of trading volume in June alone, which generated over 140,000 USD (synthetic USD) of trading fees for SNX holders.Did you expect that? If so what unseen opportunities did you see that result in the traction you have been gaining recently?
I guess you could say that this traction happened slowly, then all at once. Once we realised what our trading platform could offer, we were really excited, as our decentralised collateral pool seemed to enable something the Ethereum ecosystem didn’t already have. But initially we launched with just a range of fiat currencies, and then just synthetic Bitcoin, and volume was relatively low during this time. However, once we launched more synthetic cryptocurrencies, both long and short, the utility the platform provided was clear, and it was suddenly apparent that we had some product-market-fit.
Would you say that investing in crypto is like gambling?
You could draw a link between gambling and any type of investing, but at this stage so many crypto markets are so inefficient and so volatile that a lot of crypto trading is extremely high-risk compared to traditional markets.
How is SNX staked as collateral to back these synthetic assets?
SNX holders are currently incentivised to stake in two ways. Firstly, there’s Synth exchange rewards, which are the fees generated by traders on Synthetix.Exchange. Every trade from one synthetic asset (Synth) to another generates a small transaction fee, which is sent to a fee pool, and every SNX staker can claim their portion of these fees. The second incentive to stake is SNX staking rewards. Earlier this year in March, Synthetix implemented an inflationary monetary policy until March 2024, which will see the total SNX supply increased from 100,000,000 to around 245,000,000. This is to provide incentive for SNX holders to stake their SNX at this early stage of the system in which some holders might deem the current level of Synth exchange rewards to be insufficient motivation.
What do you see as the biggest challenges to cryptocurrencies in general? How is Synthetix countering these risks?
The biggest challenges at the moment are regulation and UI/UX. Regulation is an obvious one, and it’s key for projects to work towards decentralisation in a way that ensures that they’re censorship-resistant. Synthetix currently has some centralised aspects but we’re on a path to greater decentralisation, and our recent community governance meeting is a key step towards that.
We saw that Synthetix has become a key part of the growing DeFi ecosystem, which, recently reaching 3rd on DeFiPulse.com for total value locked up. Can you tell us more about that?
Absolutely. DefiPulse is a great tool for measuring how much value projects within the DeFi ecosystem have locked for whatever service they’re offering. The DeFi space is extremely exciting, so being able to easily track and compare the usage of these new decentralised financial services is very useful.
What are the top priorities for the project right now?
Right now we’re planning on adding as much utility to Synthetix.Exchange as we can, so we’re currently working on some new Synths and soon we’ll work on improving the user experience.
And what are your goals for the future? Is there anything that you guys are particularly excited about that is on your roadmap?
The next major milestone we hope to get to later this year is synthetic positions, which will support leveraged trading, triggered orders, options and futures. It’s going to substantially add to the utility of Synthetix.Exchange, and we’ve been working towards it for some time now.
Kain thank you for your time. It was a pleasure to discuss this topic with you.