Why Bering Waters Ventures Is Betting On Synthetix, The Derivatives Exchange For Finance 3.0
This article was first published on December 28, 2019.
Bering Waters Ventures is excited to announce its investment in crypto-asset derivatives platform Synthetix, one of the largest DeFi platforms in the market with over $171 million (~1.2 million ETH) now locked in collateral.
Interest in Synthetix has exploded over the last 10 months, with value locked going from less than a million dollars in March to $171 million in December, and daily trade volume growing from under $1m in August to nearly $10 million in December. Considering the scope of this project, we see these figures increasing by orders of magnitude.
What Is Synthetix Doing And Why Does It Matter
Synthetix is a synthetic derivatives platform based on Ethereum that enables anyone to trade and invest in synthesized assets like foreign currencies, cryptocurrencies, commodities, and soon, indices and stocks — in decentralized and non-custodial fashion.
The SNX collateral token acts as the backbone for all synthetic assets and the platform currently has two mechanisms in place to incentivize holders to lock up SNX and maintain the integrity of the system.
First, 0.3% of all trading fees on Synthetix.Exchange are distributed proportionately to SNX stakers in the form of sUSD, the platform’s USD-pegged stablecoin. Some stakers also believe that a better fee structure to implement would be to have variable fees where fees increase asset as an asset’s liquidity decreases.
Second, the Synthetix team is piloting an inflationary supply for SNX, rewarding excess tokens to SNX holders for staking their tokens, and contributing to the platform’s early growth.
This arrangement allows users to trade a wide range of synthetic assets backed by SNX, from fiat-pegged stablecoins (sEUR, sAUD, sUSD) to synthesized cryptos (iLTC, iBTC, iMKR), and finally, passively generate returns on their locked SNX holdings.
Infinite liquidity, A Broad Range Of Assets
For the record, Synthetix is not the only synthetic asset platform in the market (it is the second-largest behind Maker) — but the platform has key features we believe set it aside from competitors.
First and foremost the Synthetix “infinite liquidity” model gives the platform a fundamental selling point. All synthetic assets are issued against the system’s shared pool of SNX, overcollateralized by 750%.
In practice, this means instant execution for trades, regardless of the asset being traded — there’s no counterparty, no order book, and no order-matching. This is a clear drawcard for users, who can convert between assets freely and instantly as long as they accept the price offered by the platform’s private oracle (the Synthetix team are looking to move to a decentralized oracle).
For this reason, Synthetix can list a vast spectrum of assets regardless of their inherent liquidity and allow investors — anywhere in the world — to mimic the returns of assets they would otherwise be unable to access.
This is a tremendous value proposition given the growth trajectory of the crypto derivatives market (with platforms like BitMEX at times seeing more than $10 billion volume a day), not mentioning the potential for spillover into the $600 trillion+ traditional derivatives market.
As Synthetix adds more assets, enables leveraged trading, and accepts new types of collateral such as USDT, BTC, or ETH, we expect the platform will begin to challenge existing derivatives giants as a decentralized, non-custodial, and highly liquid trading venue.
Why Synthetix Fits Our Investment Thesis
The Synthetix project is strongly aligned with our focus-disruptive projects aimed at providing innovative instruments, mechanisms, and infrastructure for Finance 3.0.
About Bering Waters Ventures
Founded in 2019, Bering Waters Ventures focuses on research-heavy innovations in the blockchain and cryptocurrency space. It identifies and supports companies and entrepreneurs of all types and sizes, from undervalued projects to leaders in its sector. Its mission is to provide value to projects through its services and solutions offered across three companies and to leverage its extensive network of global investors in the areas of funding, market strategy, and development support. Bering Waters Ventures is one of three businesses that form Bering Waters Group.
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