Incentives¶
Here is an overview of the incentives and token flow in the Synthetix system. It is built around incentives; users who benefit from a service pay other users who enable that service. This section will explain each category of rewards as well as each acting party within the system.
Sources of Value¶
Exchange Fees¶
Exchange fees are generated whenever a user exchanges one synthetic asset (Synth) for another through Synthetix.Exchange. Fees are typically between 10-100 bps (0.1%-1%), though usually 30 bps, and when generated are sent to the fee pool, where it is available to be claimed proportionally by SNX stakers each week.
SNX Staking Rewards¶
SNX staking rewards are generated through the inflationary monetary policy implemented in March 2018. At the same time as they claim their exchange fees stakers can claim their staking rewards, which are escrowed for a year. The SNX staking rewards enabled by the inflationary supply are set to decrease gradually until September 2023, where it will become a 2.5% annual terminal inflation rate.
Secondary incentives¶
In addition to the two primary forms of incentives, Synthetix also runs various incentives to create on-ramps, balance out particular dynamics, or trial different behaviour. These are either paid with a portion of the weekly inflationary SNX when implemented at the protocol level, or with SNX from the synthetixDAO treasury if they are just trials.
sUSD/DAI-USDC-USDT liquidity on Curve¶
Amount: 48,000 SNX per week
Duration: Mar 13, 2020 onwards
Pool: Curve sBTC/renBTC/wBTC
Staking Contract: StakingRewardssUSDCurve
Source: Curvepool (via Unipool)
Aim: This incentive aims to provide an on-ramp into trading on Synthetix.Exchange for traders with stablecoins.
iETH holders¶
Amount: 16,000 SNX per week
Duration: Apr 24, 2020 - ongoing
Pool: None (iETH is staked directly)
Staking Contract: StakingRewardsiETH
Source: iETHRewards
Note: the source file above was modified on L13 before deployment to use the iETH proxy address
Aim: This incentive aims to help reduce the impact of sETH holdings on the SNX stakers' debt pool by incentivising people to hold iETH.
iBTC holders (trial)¶
Amount: 16,000 SNX per week
Duration: Oct 27, 2020 - Jan 20, 2021
Pool: None (iBTC is staked directly)
Staking Contract: StakingRewardsiBTC
Source: iBTCRewards
Aim: This trial aims to help reduce the impact of iBTC holdings on the SNX stakers' debt pool by incentivising people to hold iBTC.
Deprecated incentives¶
sETH/ETH liquidity on Uniswap v1¶
Amount: Initially 5% of the weekly inflationary SNX, then 64,000 SNX per week, then progressively less.
Duration: Jul 12, 2019 - Jun 26, 2020
Pool: Uniswap sETH:ETH V1
Staking Contract: StakingRewardssETHUniswapV1
Source: Unipool
Aim: This incentive aimed to provide an on-ramp into trading on Synthetix.Exchange for traders with ETH. sETH was chosen over sUSD because these two assets should always trade at parity, and shifts in the price of ETH against USD do not require arbitrage.
sBTC/renBTC-wBTC liquidity on Curve (trial)¶
Amount: 10,000 SNX and 25,000 REN per week, distributed via Balancer BPT tokens in a shared Balancer pool
Duration: Jun 19, 2020 - Aug 28, 2020
Pool: Curve sBTC/renBTC/wBTC
Staking Contract: StakingRewardssBTCCurve
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the
Unipoolcontract to make it re-usable.
Aim: This trial is providing the SNX component of a SNX/REN liquidity pool (along with Ren Protocol) to help generate rewards for the sBTC/renBTC/WBTC liquidity providers on Curve.
iBTC holders (trial)¶
Amount: 16,000 SNX per week
Duration: Jul 24, 2020 - Sep 18, 2020
Pool: None (iBTC is staked directly)
Staking Contract: StakingRewardsiBTC
Source: iBTCRewards (via Unipool)
Note: the source file above was modified on L13 before deployment to use the iBTC proxy address
Aim: This trial aims to help reduce the impact of sETH holdings on the SNX stakers' debt pool by incentivising people to hold iETH.
sXAU/USDC liquidity on Uniswap v2 (trial)¶
Amount: 8,000 SNX per week
Duration: May 30, 2020 - Jun 27, 2020
Pool: Uniswap sXAU:USDC V2
Staking Contract: StakingRewardssXAUUniswapV2
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the
Unipoolcontract to make it re-usable.
Aim: This trial aimed to test demand for sXAU (synthetic gold) and trial Uniswap v2, which was recently released.
SNX/USDC liquidity on Balancer (trial)¶
Amount: 8,000 SNX per week
Duration: Jun 5, 2020 - Jul 3, 2020
Pool: SNX 90%/USDC 10%
Staking Contract: StakingRewardsSNXBalancer
Source: Staking Rewards (via Unipool)
Note: this deployment was based off a PR (#523) in Synthetixio/synthetix to do a minor change to the
Unipoolcontract to make it re-usable.
Aim: This trial aimed to test Balancer as a means for providing extra SNX liquidity, as well as trialling the recently released Balancer protocol.
Value Recipients¶
SNX Stakers¶
SNX stakers stake their SNX and receive two kinds of rewards: exchange fees and SNX staking rewards. But by staking, they also take on the risk of 'debt.' When someone stakes their SNX, to then immediately unstake it they need to burn as much sUSD as they just minted — this sUSD figure is their debt, and all SNX stakers' debt is pooled together (with each staker holding a proportion of it). But this pooled debt is also where profits and losses from people trading on Synthetix.Exchange is represented, so a staker's debt can change over time depending on traders' overall profits and losses. This is the risk they assume when staking their SNX.
ETH stakers¶
It is also possible to mint Synths by staking ETH. However, ETH stakers' debt is denominated in ETH rather than sUSD. It does not get added to the system's pooled debt, and thus does not fluctuate depending on traders' outcomes. However, there is a 5% APR to stake ETH, as well as a small minting fee.
Traders¶
Traders on Synthetix.Exchange can take advantage of the system enabled by SNX stakers, namely trading a wide variety of assets with infinite liquidity and no slippage. They do not need to stake or even hold SNX.
Arbitrageurs¶
The primary opportunity for arbitrage in Synthetix is taking advantage of underpriced assets on the secondary market. If sETH or sUSD are ever trading below the price of ETH or USD respectively, then stakers can profit by purchasing them cheaply and using them within the Synthetix system, where their values do not take the market rate into consideration.
Bug Bounty¶
Synthetix offers bug bounties for its smart contracts (not minor issues relating to UI/UX or website domains).
There are four tiers of bug bounties offered, each to be paid in sUSD.
The reward brackets are as following:
Informational: $100 sUSD Low severity: $500 sUSD Moderate severity: $1000 sUSD High severity: $5000 sUSD
To report a bug, please practice responsible disclosure via email at bugs@synthetix.io.
Additional Crypto-economic Discussions¶
For more information and discussions on incentives, please see the lateset entries in our blog: blog.synthetix.io.