Activation of Synthetics

THORChain Author

Published in

THORChain

3 min readMar 9, 2022

THORChain Synths go Live in Chaosnet! Synthetic assets with no IL and with single asset exposure.

Summary

Synthetics are derived from liquidity pools with no risk of impermanent loss — A first for DeFi!. A THORChain synth consists of half asset and half rune backing. It allows users to hold and trade a representative of an L1 asset faster and at a lower cost.

Synthetics will increase network usage, network TVL, pool depth, thus cheaper swap fees, and generate greater income for liquidity providers.

Synthetics were activated by a 2/3 majority of distributed node operators voting to change a network (Mimir) setting demonstrating THORChain’s decentralisation. Synths launch with a precautionary limit of 5% of the asset depth. This can be increased up to 16.5% of the asset depth by node operators over time.

The THORChain Team and Community are very excited for the Activation of Synths in Chaosnet! It is an important achievement for the network and on the road to Mainnet.

Launch Videos: GrassRoots Crypto | THORSwap

Launch Article: THORSynths are here — THORSwap

More Synths resources are below.

Synth Benefits

The THORChain network guarantees the redemption value of the Synthetic asset to the actual asset value.

Simplification allows new users with a basic understanding to hold positions or exchange assets within THORChain without the need to understand Liquidity Pools or Impermanent Loss.

Synths are on the THORChain’s blockchain they get a fixed transaction and outbound fee making them much cheaper to trade and transact compared to L1 assets.

As Synthetic assets are on the THORChain blockchain, a 5 second finality greatly reduces the wait time required when trading L1 assets.

Synthetics add to the total pool, increasing the need for bond, increasing demand for RUNE within the network. Synthetic asset redemption value is guaranteed by the network, the collateral yield bearing to Liquidity Providers.

Update: 50% reduction in swap fee was removed to stop sandwich attacks.