Synthetix: the derivatives markets ecosystem scaleup with Arbitrum

The Cryptonomist interviewed Matt Losquadro and Noah Litvin, two core contributors of Synthetix— a leading derivatives markets ecosystem and liquidity layer for permissionless derivatives like perpetual futures.

Synthetix recently announced the scaleup of its Arbitrum deployment plan — expanding its V3 liquidity layer and turnkey protocol for creating perpetual futures and derivatives. This deployment marks a significant milestone in Synthetix’s multi-chain strategy, following its successful expansion into Base earlier this year.

With Matt and Noah we spoke about the rising appeal of decentralized derivatives among fund managers and traders amidst new perps trading markets coming on-chain.

Summary

• Synthetix has recently scaled up its Arbitrum deployment plan, expanding its V3 liquidity layer and protocol for creating perpetual futures and derivatives. Can you elaborate on the strategic significance of this move for Synthetix and the broader DeFi ecosystem?
• Following your successful expansion into Base, what insights and lessons have you gained that will influence your approach to multi-chain deployment? How do you see this strategy shaping the future of decentralized derivatives?
• What factors are driving the rising interest in decentralized derivatives among fund managers and traders? How does Synthetix plan to address and leverage this growing demand?
• Perpetual futures have become a cornerstone in the derivatives market. Can you discuss the unique features and advantages of Synthetix’s perpetual futures offerings compared to traditional and other decentralized platforms?
• Scaling and deploying on multiple chains present significant technical challenges. Can you share some of the key technical hurdles Synthetix has faced in its recent expansions and how your team has overcome them?
• Looking ahead, what are your goals for Synthetix in the next 12 months? How do you envision the role of decentralized derivatives evolving within the larger DeFi landscape, and what part will Synthetix play in that transformation?

Synthetix has recently scaled up its Arbitrum deployment plan, expanding its V3 liquidity layer and protocol for creating perpetual futures and derivatives. Can you elaborate on the strategic significance of this move for Synthetix and the broader DeFi ecosystem?

Arbitrum has proven itself to maintain a large and growing ecosystem of DeFi users and traders with the largest amount of TVL out of Ethereum L2s. Synthetix aims to provide, what we feel is the best on-chain perps mechanism and are excited to offer this product to the Arbitrum community.

Following your successful expansion into Base, what insights and lessons have you gained that will influence your approach to multi-chain deployment? How do you see this strategy shaping the future of decentralized derivatives?

The Andromeda deployment on Base was the first fully functioning deployment of Synthetix V3 and acted as a test for several new parameters and mechanism designs including accepting USDC collateral and new strategies for bootstrapping liquidity in a more capital-efficient way.

The successful deployment on Base paved the way for our deployment on Arbitrum and future deployments on the Optimism Superchain and Ethereum mainnet.

What factors are driving the rising interest in decentralized derivatives among fund managers and traders? How does Synthetix plan to address and leverage this growing demand?

Coming off the collapse of FTX and other centralized trading platforms, many traders realized that centralized exchanges are black boxes that can hold user funds hostage if the teams or founders act nefariously. Synthetix has built a fully decentralized and permissionless system that truly cannot rug traders.

Further, with the improved performance of L2s over the last year, costs and performance of trading on-chain are approaching (but are not quite at) parity with CEXs. Synthetix will continue to scale liquidity and work with front end integrators like Kwenta and Infinex to improve user experience in trading onchain derivatives. Finally, the permissionless and composable nature of Synthetix Perps allows us to nurture other builders to innovate and build new derivative and mechanism designs.

Perpetual futures have become a cornerstone in the derivatives market. Can you discuss the unique features and advantages of Synthetix’s perpetual futures offerings compared to traditional and other decentralized platforms?

Synthetix’s perpetual futures offer a unique advantage by providing a decentralized, transparent, and secure trading environment. They allow users to trade synthetic assets, gaining exposure to various markets and supporting multiple collateral types, which offers flexibility for traders.

The platform provides deep liquidity through pooled resources, enabling large trades with minimal price impact. Additionally, competitive fees and integration with Layer 2 solutions enhance trading efficiency, making Synthetix a highly attractive choice in the decentralized derivatives market.

Scaling and deploying on multiple chains present significant technical challenges. Can you share some of the key technical hurdles Synthetix has faced in its recent expansions and how your team has overcome them?

For the last two years, the engineering team at Synthetix has been building the core infrastructure of our V3 system which enables modular and simple deployments across chains. With the refinement of this system, one of the larger hurdles has become less technical and instead, a hurdle of bootstrapping capital and scaling trading volume on the system.

Synthetix has onboarded 10’s of millions in new TVL through it’s Base and Arbitrum deployments and has legacy TVL from it’s V2x system that will enable scaled liquidity in the coming months. With new partner integrations on the near horizon we see the next hurdle as one of building sustained user acquisition via our front end partners.

Looking ahead, what are your goals for Synthetix in the next 12 months? How do you envision the role of decentralized derivatives evolving within the larger DeFi landscape, and what part will Synthetix play in that transformation?

In the next 12 months, Synthetix plans to scale up collateral and trading volume on our current deployments. This will be done by enabling new collateral types, particularly latent yield-generating assets to allow depositors to earn additional yield on that capital. We will be further improving the trading experience with multi-collateral perps, enabling long-tail trading pairs, and deploying an order book model to complement our AMM-style perps.

Our team will be focused on attracting new builders to build novel derivatives markets to expand beyond perpetual futures. Synthetix also has plans to deploy an app chain on the Optimism Superchain to act as the central hub for governance and fee-share for SNX stakers.

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