Kain Warwick, the founder of DeFi protocol Synthetix, has proposed turning off very high yield returns for SNX stakers and capping the total SNX token supply at 300 million.

The protocol on the Ethereum and Optimism networks enables traders to produce artificial versions of crypto native assets, traditional financial investments, and commodities.

Warwick explained in an Aug. 25 Synthetix Improvement Proposal (SIP) that SNX reward inflation was originally intended to "bootstrap the network," but he believes it is no longer necessary because they can generate long-term fee yields from atomic swaps.

Using the platform for atomic swaps by DeFi protocols 1inch and Curve has significantly increased fee revenue, bringing more traffic to the protocol. In June, the protocol's daily fee revenue surpassed $1 million, which was four times that of Bitcoin.

The company currently charges a seven-day estimate of $158,857 in fees, slightly less than Bitcoin's seven-day average of $222,651.

Stakers receive all SUSD stablecoin fees from protocol users. The current APY for stakers due to SNX rewards and SUSD fees is about 67%, but this is likely to drop closer to 15%-20% if based solely on 'real yield' from SUSD fees.

In a Thursday Twitter post, Warwick — known as the "father of modern agriculture" for promoting DeFi yield farming — revealed that after informal discussions, he believed 'SIP-276: Turn off the money printer' had a "decent chance" of passing. The proposal will be formalized in a presentation next week.

If the Synthetix governance society approves SIP-276, ten periodic installments of 675,000 SNX tokens would be added to the existing supply of 293 million tokens to reach the 300 million mark before inflation is stopped indefinitely.

Twitter user "Synthaman" was particularly upbeat about the news, writing, "#SNX is about to become a unique commodity with inflation going to ZERO..." Others, however, are skeptical about what SIP-276 would mean for the protocol in the long run.

Delphi Digital, an analyst firm, tweeted that with Synthetix soon ceasing the issuing of SNX tokens, the protocol faced the difficulty of keeping its current user base and "attracting new users with organic revenue in a market where the gain is abundant."

It remains to be seen if decentralized finance (DeFi) protocols such as Synthetix can attract enough stakeholders solely through fee revenue or how the end of SNX inflation will affect the SNX token price, which is currently $3.04, up 10.5% in the last week.

Warwick also stated that if SIP-276 is approved, it will be incorporated into its governance process.

Posted 
Aug 26, 2022
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