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Synthetix project integrates Ether as collateral

By Inkarias - 2020-02-23

With the Achernar release, the core team of Synthetix is introducing Ether as an alternative form of collateral in Synthetix. It’s a major piece of new functionality and will be started with a three month trial period to observe demand and measure user engagement. The full audit report for Ether collateral can be read here: https://www.synthetix.io/uploads/sigp_ether_collateral_audit_report.pdf

The choice of Ether as a solution

Eth makes it easier for a newcomer to start trading on Synthetix.Exchange. If they have ETH, they can try it out without selling their ETH for Synths. Adding Ether as collateral also contributes to the Synth supply, and thus trading fees, while diversifying the collateral. This increases the system’s scalability while also protecting it from potential SNX price shocks, without diluting the value of SNX. One other interesting implication is that it could have a positive effect on the sETH liquidity pool on Uniswap. At the moment, many LP’s are SNX stakers, who are providing the sETH they’ve minted through staking their SNXEther

How it will work

There will be a three month trial period for ETH collateral, with a planned initial total cap of 1500 ETH (it may then be increased after launch). The collateral requirement will be 150%, with a minting fee of 50bps (0.5%) and an interest rate of 5% APR. The collateralization process will be executed through Synthetix.Exchange’s interface. By locking collateral, ETH stakers will create a debt they need to repay if they want to withdraw their ETH and leave the system. This is similar to the debt that SNX stakers create when they lock their SNX as collateral, but the difference is that ETH stakers will not take on risk of debt pool fluctuations.
More details on the Achernar release can be found at https://www.synthetix.io