Sunday, December 3, 2023

Tokenomics Dialogue Assessment

April 17, 2023

The next submit accommodates a evaluate of a neighborhood Discord dialog from the spartan-council channel relating to tokenomics.

Particular weblog submit incoming! A few weeks in the past there was an in depth neighborhood dialogue within the spartan-council channel of the Discord about tokenomics, collateral, and so forth. It was delivered to our consideration that it could be helpful to a few of our readers to evaluate this dialog, and we agree. So let’s get into it.

As a short background, SNX is the one collateral that may at the moment be staked within the Synthetix protocol. This drives worth to SNX stakers, since they’re rewarded for providing up their collateral to backstop the community.

One of many challenges of SNX being the one accepted staking collateral is a really actual ceiling being placed on scalability, because the financial bandwidth is finally constrained by the market capitalization of SNX. Community exercise can be constrained by staking participation, which is often between 60% and 80% and varies based mostly on market situations. We will recall that in a earlier incentive program, sUSD briefly traded close to $1.10 because of the liquidity constraint.

Nevertheless, provided that many points of the protocol are being reimagined in V3, a chance is introduced to transform tokenomics surrounding the SNX token as properly.

Because the macro panorama in crypto continues to shift away from centralized exchanges, the potential of this could possibly be very engaging if the scaling points are labored out. Including different, extra liquid staking collateral would alleviate a few of the constraints, however there are in fact execs and cons. That is the place the Discord dialog is available in…

Let’s begin with a remark from CT, who was discussing the worth proposition of SNX with SynthaMan and synthquest:

CT’s issues have been that customers is not going to have an interest within the token if it doesn’t provide any worth past governance. Synthquest introduced up the chance that one other protocol could fork V3, not provide a token, after which distribute the entire charges to LPs (stakers), which might be far more fascinating for LPs.

It may also be helpful to incorporate Afif’s feedback right here:

There have been additionally a number of different essential feedback from members of the neighborhood, like Burt Rock, Hauntid, and JVK.

In V3, it could ultimately be doable to create markets with practically any collateral sort together with ETH (pending governance in fact). From there, it could be so simple as the Spartan Council voting on whether or not or not the debt pool would again that market.

JVK additionally introduced up that being a longtime “blue-chip” DeFi protocol provides Synthetix a reputation-backed benefit {that a} potential fork must overcome with a purpose to appeal to customers. He believes that is very true given the entire current CEX mayhem:

Afif agreed with this, however reiterated that the main focus needs to be making the product the very best that it may presumably be. And Daver advised a configurable charge share relying on the protocol’s instant liquidity wants.

Kain then clearly introduced a few of the concepts hashed out earlier within the dialogue in a approach that appeared to resonate with everybody. He additionally agreed {that a} dynamic charge sharing system was probably the very best path ahead.

General, this was a reasonably productive neighborhood dialogue that’s going to be an ongoing subject of dialog. We’ll proceed to offer updates as they arrive, and monitor extra formal governance discussions as they occur!

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