Deploy a contract that accepts ETH and mints an equivalent amount of sUSD.
\nThis SIP proposes deployment of a contract that accepts ETH and mints an equivalent amount of sUSD. To offset short ETH exposure taken on by the debt pool in the course of this exchange, the proposed contract will also open an equivalent short ETH perp position to be borne by SNX stakers.
\nThe Synthetix protocol chronically suffers from synth supply shortages. Currently, the protocol utilizes three primary mechanisms to meet synth demand:
\n(1) SNX-backed minting of synths
\n(2) ETH-backed synth loans
\n(3) Synth wrappers
\nHowever, all three generally fall short of being able to satiate market demand for synths. (1) is contingent upon SNX price appreciation, (2) is capital inefficient and generally underutilized, and (3) is difficult to scale without introducing significant risk. Currently, Synthetix supports wrapper contracts for ETH <> sETH and LUSD <> sUSD.
\nAs has been seen in the past, over-expansion of ETH wrapper capacity leads to a large amount of wrapped sETH converted to sUSD (e.g. to arbitrage sUSD premium) which exposes the stakers to ETH downside. Stablecoin wrappers can ameliorate these risks, but stablecoins that can meet the protocol’s criteria for safety and liquidity are generally not viable.
\nThis SIP proposes the deployment of a contract that wraps a delta neutral position composed of spot ETH and perp ETH short to mint sUSD with 100% capital efficiency (i.e. $1 of ETH can generate 1 sUSD). This allows for a highly liquid source of sUSD that doesn’t carry the risks of an over-utilized ETH wrapper while also creating a stream of income for stakers when funding rates are positive.
\nWhenever a user deposits ETH, sUSD is freshly minted. Since the current perpetual futures contracts do not support ETH collateral, the contract will mint additional sUSD margin to collateralize the short position. The contract can also accept sUSD to release an equivalent amount of ETH collateral while simultaneously unwinding part of the perp ETH short.
\nAt a high level, this SIP proposes a mechanism to pair ETH collateral with a short ETH position and use the resulting derivative as a source of stable collateral for sUSD issuance. In order for this to be compatible with the current contract architecture, the contract must mint additional sUSD with half being issued to user, and half being used to collateralize the short position.
\nN/A
\nGeneral flow
\nRebalancing perp margin
\nDebt calculation
\nRejected as per the sip author
\nN/A
\nCopyright and related rights waived via CC0.
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