I’m starting to come around to the idea of deploying the @synthetix_io Exchange contracts to multiple L1’s. This is purely based on a concept that emerged recently for Synths to act as fast withdrawal bridges across networks. Synthetix has some *weird* properties so a 🧵👇
As @AndreCronjeTech demonstrated recently 20% of people are willing to lie about the fact that they understand how Synthetix works to look smart.
For everyone else a quick overview of how Synthetic works before I dive into the concept of bridges.
There are main two components to Synthetix. Staking and Exchanging. Staking takes SNX and other collateral and turns it into Synths. Think ETH -> DAI in Maker.
Exchanging is by far the cooler side. It allows you to take any Synth e.g. sBTC, sETH, sUSD and many more and convert between them at the current @chainlink oracle price.
In order to do this the protocol has the ability to burn one synth and mint another synth. This ability enables exchanges but also creates the potential for cross chain bridges.
To the best of my knowledge no one else has been stupid enough to try something like this. And for good reason, when you allow direct swaps like this it creates all kinds of attack vectors. Even mirror silos pools. This is one of the reasons we decided to pursue @optimismPBC .
On Optimism the lower latency of the network allows for atomic transactions between Synths, there is no waiting time which means once we start to get more traction on Optimism the integration of Synths will create significant volume for the protocol, @lyrafinance is already there
The other reason was to the reduce the costs for stakers who must maintain their collateral ratios on a weekly basis. So in the next few months the staking side of the protocol will be completely migrated to L2 to reduce costs for everyone.
You will then have exchanges supported on both L1 and L2 but backed by collateral only on Optimism. Because Synths across both networks are backed by the same pool of collateral the protocol can easily burn synths on one network and mint them on another.
What is missing is cross chain messaging. But like with the oracle prices @synthetix_io uses @chainlink to pass messages between networks about the total supply of Synths on each network to ensure the protocol remains collateralised. These messages can enable fast withdrawals.
Crucially this works even if all of the collateral is on one network and all of the Synths are on another. From the protocols perspective this is not an impediment.
The contracts that manage this will be called Synth teleporters. Because like Star Trek style teleporters, they destroy the thing they are teleporting on one side and recreate it on the other side.
This would allow for a fast withdrawal or deposit between L1 and L2 of tens of millions of dollars in practice and orders of magnitude more in theory, constrained only by the Synth supply.
But there are other benefits, because of the work of @CurveFinance and @AndreCronjeTech we have cross asset swaps on L1, and hopefully on L2 soon. This means you can take WBTC on L2 and get USDC on L1 requiring 1 or maybe 2 transactions, in only a few minutes.
One of the major objections to cross-chain bridges is that most of them are just multisigs and the ones that aren’t are very complex and therefore hard to reason about. H/t @RuneKek.
Synthetix very complex so it doesn’t offset this argument, but it has been running on mainnet for years and the contracts are pretty battle hardened so this presents an opportunity.
If you can use Synths for cross chain fast withdrawals you probably need the Exchange contracts everywhere that people will want to move funds. In the immediate term, @0xPolygon and @arbitrum definitely and other networks later if this two work.
You could even build a scheme that allowed you to have this be user controlled, where a signed message is generated by one side of the bridge that can be presented to the other side. There are several variations on this that are possible.
Having used Optimism daily for several months I am seeing a trend of improving liquidity but it is still very very far away from mainnet in terms of market efficiency.
Using synths to span the four major networks in the Ethereum ecosystem could rapidly increase liquidity across all of them.
This is still not possible until after the debt pool synthesis in a month or so, but once that is out of the way work on teleporters will begin and we will hopefully see an implementation across L1 and Optimism in Q1. Other EVM networks could follow fairly quickly.
The concept needs more discussion and feasibility study but in principle it is possible. The question then becomes does the protocol charge a fee for this service, I think it makes sense to do so provided it is not prohibitively expensive.
Probably nothing.

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More from @kaiynne

28 Dec 21
I appear to have become public enemy #1 in red triangle land. While the reply guys are painful it has provided some interesting perspective on the narrative. My first take away is that I genuinely underestimated how powerful the “Et hirium is toooo expensive” meme would be. 🧵👇
Interestingly my first attempt to post this thread got rugged by iOS, so I got a chance to see the responses to the first tweet. So I am going to add a little more colour. L1 is too expensive to use, the meme is not about that though.
The Ethereum is too expensive meme is about trying to make so much noise about L1 gas prices that no one notices there are multiple options to stay within the ecosystem and pay less gas.
Read 23 tweets
21 Nov 21
I appreciate the shout out ❤️. The story behind yield farming is a long and complicated one imo and a LOT of people contributed to it.
To understand why yield farming to get ownership of a protocol in the form of tokens didn’t happen until 2018 you have to go back to the market structure of ICO’s. For most of this era the expectation was that all the tokens would be distributed in a single event.
For example in March 2018 Havven distributed 85% of the HAV token supply, some were locked in vesting, but the protocol treasury only retained about 15% of the tokens.
Read 30 tweets
7 Nov 21
Lots of @synthetix_io FUD going around lately. A thread on my perspective on the state of the project. This year has been painful in many ways, scaling has been slow, but I said from the start of the year the L2 transition was going be rough. Despite this I’m still bullish.
We have been in this position multiple times in the past. The CC’s tend to take on many simultaneous threads, probably too many. This leads to a point where there are 3-4 major improvements at 90% completion. It feels like stagnation but only upon a cursory glance.
Perpetual futures are done, we had a testnet trading competition last month. Mainnet will happen after the final OΞ regenesis this month. Once they are live, trading incentives will finally be enabled.
Read 19 tweets
27 Oct 21
As promised, a thread on where DeFi goes next and why DeFi summer was not the zenith. I’m feeling particularly self-indulgent so this is going to be a long thread.
Original tweet I am responding to is here.
It is irrefutable that every og DeFi token has been rekt against ETH in the last year, in hindsight this really shouldn’t be surprising. During DeFi summer the blue chip projects were not just the dominant ETH narrative they were the only narrative.
Read 25 tweets
27 Oct 21
Here is part 2 due to 25 tweet limit on threads 😓.
When was the last time we hit a 50m+ install base of a transformational platform? It was 2010. Here is the first three years of iPhones sales.
Instgram, Uber and other Apps that launched as the iPhone install base scaled were able to tap into this new platform to grow at phenomenal rates.
Read 18 tweets
8 Aug 21
I’ve been thinking a lot lately about the intersection of DeFi, NFTs, art and gaming lately. Putting my current thoughts into a thread…
The first thing I want to highlight is the difference between attention and impact. Many things that garner high attention are not impactful, think the latest marvel movie. While many things that are high impact get minimal attention, think novel mathematical proofs.
As excited as we have all been about DeFi the reality is that it falls into the category of finance, which is typically high impact but low attention. The one offsetting factor being that speculative manias are often high attention. As are market implosions.
Read 12 tweets

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