Thread by @pseudo__alakon

1/n @synthetix_io #snx remains one of the most misunderstood DeFi protocol.
In the last week it surged at one of the protocol generating the most fees.
Here's why:

2/n Most of this volume comes from the "atomic swap" feature recently integrated by @1inch
Atomic swaps captured a lot of volume from ETHUSD and BTCUSD pair on Ethereum mainnet.
But it took a lot of work from Synthetix team to get there.

3/n To prevent oracle update front-running, due to latency on Ethereum mainnet, Synthetix had a mechanism of "fee reclamation" that would block exchange, transfer, or burn of a newly acquired synth for a few minutes.

4/n To solve this issue, atomic swaps use a combination of Chainlink, Uniswap spot and Uniswap TWAP oracle. Synth can now be traded without fee reclamation period while the protocol is still safe from front-running.

5/n But what are atomic swaps exactly?
Trading through an AMM, price quote will depend on liquidity pool depth, a large trade might incur a high slippage.
Trades on Synthetix are quoted at oracle price, regardless of size.

6/n Atomic swap for ETHUSDC use the following route:
USDC --(Curve)--> sUSD --(Synthetix)--> sETH --(Curve)--> ETH
Very low slippage from @CurveFinance stableswaps, no slippage from Synthetix.
This gives a better price execution than AMM every time if the size is big enough.

7/n What does that mean for $SNX ?
While you can trade on Synthetix without slippage you still need to pay a fee.
All those fees go straight to $SNX stakers.
Atomic swaps integration on 1inch generated record fee for stakers.

8/n What is next for Synthetix?
So far only 1inch integrated this new feature.
Team is working with all other DEX aggregators to integrate it shortly and capture even more market share.
It could also be extended to other assets if synth liquidity becomes big enough.