Synthetix merges debt pool on L1 and L2 to expand liquidity and staking capabilities

Decentralized Finance protocol Synthetix has announced that it has deployed its Debt Synthesis feature this Thursday between 9 pm and 11 pm UTC. The team is expecting to positively impact staking participants in two different types:

1. Synthetic inflationary staking rewards
2. Debt hedging

Happy Debt Pool Synthesis Day!

Starting later today, March 24th, at 9pm UTC, the debt pools on L1 and L2 will be merged into one.

This paves the way for Synth Teleporters, where synths can instantly be moved to any chain and fungibility b/w @optimismPBC and mainnet

Get ready. https://t.co/JfcsR4DYEH

— Synthetix ⚔️ (@synthetix_io) March 24, 2022

Synthetix currently manages debt pools on two chains: Ethereum mainnet and Optimism, a layer 2 Ethereum scaling solution, with a combined total value locked of $930 million and $157 million, respectively.

The company has expressed its aim to migrate to an “Optimism-native protocol,” with one of its council members, kain.eth, advocating for this path by citing Optimism’s enormous growth potential.

On the question of debt hedging, it was calculated that the total-value of the two pools once merged amounts to sETH: 31 percent Short, sBTC: 25 percent Long, sUSD: 27 percent Long, other assets: 11 percent Long, and sEUR: 7 percent Long.

Synthetix uses Chainlink oracles 

The team stated that the “debt amount for all of the issued synths is calculated off-chain, and then the value is pushed on-chain using Chainlink’s decentralized oracle network, which is read by Synthetix contracts on both L1 and L2,” using Chainlink oracles as the central component of consensus for the total debt accumulation. It adds:

“Merging the debt pools provides maximum liquidity across the protocol and [the ability to] transfer synths between multiple chains efficiently via cross-chain messaging, rather than relying on automated market makers… debt pool synthesis allows the protocol to have fungibility on both L1 and L2.”

Notably, as TheCoinRise reported, Chainlink Labs recently launched a program to help entrepreneurs and developers with Blockchain resources.

Along with improving debt hedging, Synthetic is also working on the implementation of a long-awaited function to create pooled synthetic futures contracts making SNX as the financial instrument — previously proposed in 2020’s Synthetix Improvement Proposal.