SNXweave Weekly Recap 165

January 22, 2025

The next publish incorporates a recap of reports, initiatives, and vital updates from the Spartan Council and Core Contributors from final week.

👉TLDR

SIP-420: Protocol Owned SNAX presentation recap (see beneath for particulars)Create a mechanism for SNX stakers to supply staked SNX to protocol-owned staking pool, the place the protocol will personal the debt and use it to generate yield through Ethena.Q&A session after presentation

Spartan Council and SIP updates

Final week Kain offered SIP-420 — a proposal to create a mechanism for SNX stakers to supply staked SNX to protocol-owned staking pool, the place the protocol will personal the debt and use it to generate yield through Ethena.

The important thing facets of this proposal are that:

Stakers would have the chance to delegate their SNX to a single, protocol-directed staking poolThe c-ratio on this pool could be 200% permitting it to be extra capital efficientThere could be a “penalty” c-ratio assigned to particular person stakers (1000%)The pool would then mint sUSD, then sUSDe, to generate further yield and distribute that again to delegators within the pool250k SNX from the treasury shall be allotted to supply bonuses to CCs who implement this proposal (on the discretion of the Spartan Council)

Presently, SNX is likely one of the solely remaining crypto property that’s nonetheless accepted as collateral for minting stablecoins (sUSD). This SIP due to this fact goals to leverage that status as a stablecoin supplier to generate income for the protocol and stakers. Kain acknowledged that there are various parameterization and optimization particulars to nonetheless be labored out, however he thinks that is directionally helpful for the protocol.

Reasonably than incentivizing stakers to problem and allocate debt the place it’s wanted, the inducement could be to delegate the collateral in order that the centralized pool managers can allocate it as they see match. This reduces the danger of ‘unhealthy debt’ as any debt issued on this pool shall be allotted on the pool supervisor’s discretion. There are, nevertheless, nonetheless market forces at play to get customers to delegate collateral to the pool.

Kain additionally pressured that the time to do that is now, on the cusp of a bull market, relatively than ready and probably lacking out on the yield. And to ensure that this to have the ability to work now, the latest peg points must first be corrected (for which Kain mentioned there’ll should be incentives to arb the curve pool).

There have been a number of questions within the chat after the presentation, so let’s evaluate what was requested and the way Kain responded:

How will yield be generated?

Kain mentioned primarily with Ethena to begin, with a c-ratio discount from 400% to 200% straight away. With this, twice as a lot debt may be minted on the identical collateral to generate yield. He added that Ethena wants staked ETH to scale their stablecoin, and there was not as a lot demand to supply staked ETH to the protocol for collateral, in order that they’ve modified their strategy and have begun accepting stablecoins.

Is Ethena promoting sUSD for staked ETH?

The reply is sure, and the curve pool will should be incentivized to accommodate this promoting. Kain estimates $10–20 million TVL could be wanted to permit for gross sales of $1 million a day.

Will this begin on mainnet or will it’s launched on Optimism as nicely?

Kain mentioned it is a fairly technical query for the scope of the proposal, and actually simply the following step is to see an implementation plan from the CCs inside 48 hours from an approval vote to make sure accountability and transparency.

How lengthy would a hypothetical debt discount program final if that’s the route the council decides to take with the proceeds of this pool?

And it was answered that this is likely one of the optimization levers that the pool managers should resolve on to sufficiently incentivize the delegators to maintain their collateral delegated.

Have there been talks with Ethena about this already?

Sure, Ethena is blissful to have extra collateral so long as there may be liquidity to transform it to staked ETH.

Total Kain is bullish and thinks the Council must ruthlessly prioritize doing no matter has the potential to reinvigorate the venture — beginning with protocol owned SNAX!