Synthetix DeFi Protocol Upgrading to Save on Gas

The move is part of an overall drive to usher in Layer 2 scaling solutions on the Ethereum network. Switching to a different blockchain and standard involves rewriting all of the smart contracts and redeveloping the entire platform which is beyond the scope of many that are already established.

Synthetix Saving Gas for DeFi Users

The on-chain synthetic asset platform, Synthetix, will be upgrading twice this week to implement new proposals that have been made in response to increasing gas prices. The first is called Fomalhaut and will launch on Sept 24. Fomalhaut will bring about two improvement proposals, SIP 85 and 86. The former will improve the collateralization of Ethereum on the platform. Currently, there is no direct mechanism to increase the Synth supply other than lowering the collateralization ratio of the network. The upgrade will introduce the borrowing and issuing of sUSD, the protocol stablecoin, against ETH. This allows the sUSD supply to grow to meet demand while introducing leverage opportunities. The second improvement is an update from the current Chainlink exchange rates to the new Chainlink Aggregator V2V3 Interface. The blog post added that the L2 migration Phase A is the first step on the migration path to Optimistic Ethereum which will be an incentivized testnet aimed at alleviating gas costs for small SNX stakers. The second upgrade is called Deneb and will be rolled out on Sept 29. This will introduce SIP 83, a mechanism to calculate and store a snapshot of the total issued Synth value for minting, burning, and claiming rewards. The purpose of this is to significantly reduce the cost of these transactions and make staking more cost-effective on L1.

Shifting Towards Layer 2

Founder Kain Warwick, who penned the post, stated that both of these releases are direct responses to increased gas costs due to Ethereum congestion. He added that some changes are stop-gaps while the protocol transitions to Optimistic Ethereum, its L2 solution:

“This hybrid approach to L2 will likely take us through to the end of the year, but it represents the near- to mid-term future of the project.”

He continued to state that there is a raft of new upgrades in the pipeline such as Kwenta and Mimosa which include front-end staking and the launch of the Synthetic futures testnet competition. At the time of press, Synthetix was ranked eighth on the DeFi Pulse charts with a TVL of $604 million, and SNX was trading at $4.25 after bouncing from a daily low of $3.77.