An article to understand the operating mechanism and product features of SynFutures, a DeFi synthetic derivatives platform


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SynFutures allows liquidity providers to customize trading pairs, supports a single currency to generate liquidity pools, and its automatic liquidator mechanism can lower the threshold for derivatives liquidation.

Written by: SynFutures Team

In recent months, decentralized exchanges (DEX) represented by automated market makers (AMM) have developed rapidly. The trading volume of the leading project Uniswap reached nearly 30 billion U.S. dollars in January 2021, surpassing a group of centralized exchanges, and also proved the feasibility of building open finance based on blockchain.

The current DEX on the market is still dominated by spot, while in traditional finance, the market size of derivatives far exceeds that of spot: According to the Bank for International Settlements (BIS) statistics on global foreign exchange transactions in 2019, spot trading volume is about 30.1% of the total transaction , While the futures category accounts for approximately 65.4%, and the options category approximately 4.5%. SynFutures is focusing on creating the next generation of digital derivatives platform.

What is SynFutures?

SynFutures is a decentralized synthetic derivatives platform that allows free addition and free trading of various digital asset derivatives currency pairs in a single currency.

The first version of the agreement will launch the futures contract market, supporting ERC-20, cross-chain assets and various off-chain assets. This means that users can leverage to long or short Bitcoin, gold, computing power, or even Tesla and other assets, and only need a single digital currency (such as USDC) to provide trading liquidity.

What are the characteristics of SynFutures V1?

Freely add trading pairs and open markets with expiration dates. Similar to Uniswap, which allows anyone to freely create new spot trading pairs, SynFutures allows liquidity providers to create any new futures trading pairs, as long as there is a corresponding on-chain price. The first version of SynFutures first introduced Chainlink and Uniswap as price oracles. Initially, it supports trading pairs including BTC, ETH, ERC-20s, gold, and foreign exchange. Soon the project will introduce other oracles to support computing power, interest rates and even stocks. Such trading assets.

Synthetic automatic market maker (sAMM) model. The current mainstream automatic market maker AMM liquidity provider must provide two tokens of a trading pair at the same time, while the sAMM model of SynFutures allows liquidity providers (LP) to provide only one asset of the trading pair, and the other asset Positions are automatically synthesized by smart contracts. For example, the default 1USDC=1USD, if the current value of an ounce of gold is 1800 USDC, the user can simply provide 3600 USDC, half of which is reserved for USDC positions, and the other half 1800 USDC is used to synthesize 1 ounce of gold, that is, the contract will Automatically create a 1x long gold futures position.

Automatic liquidator (ALQ). For derivatives, liquidation is the top priority. Other current DeFi platforms are mainly carried out by liquidators by actively monitoring prices and positions on the chain, and using their own tokens to initiate liquidation transactions. And SynFutures introduced the automatic liquidator (ALQ) smart contract to assist in the liquidation: similar to the passive market maker model of AMM, ALQ allows anyone to become an automatic liquidator simply by providing liquidity to the agreement without actively monitoring the market and sending Trading, you can passively earn clearing transaction fees, which greatly reduces the threshold for liquidators.

User protection mechanism design

As leverage and liquidation are involved, financial risk control and market price change response mechanisms are the core of the design of derivatives agreements. SynFutures members have worked in the frontline of first-line international investment banking derivatives for many years, and have introduced mature market experience into DeFi product design, such as:

Price and position restrictions: In order to protect users from large abnormal price fluctuations, such as lightning loans or other price manipulations, SynFutures introduces certain restrictions on prices and positions. Most restrictions have no impact on ordinary users, and will only be triggered when large price fluctuations occur in a single block, such as limiting the maximum price slippage of a single block, the maximum change of the spot index per second, and so on.

Anti-“needle-piercing” price mechanism: Derivatives traders usually worry about short-term sharp jumps in prices that “pierce the needle” and lead to liquidation of their positions. In order to solve this problem, SynFutures does not use the original real-time market price or Oracle price to determine whether the position will be liquidated and settled, but the marked price is processed in different trading stages, including the basis of a short period of time. Exponential moving average (EMA) processing, and time-weighted average price (TWAP) processing for spot indices.

“Settlement period” prohibits new positions: The “settlement period” of futures is also widely used in the current centralized exchanges, because when the futures expires and the settlement price is determined to calculate the profit and loss, people who hold a large number of positions have The motivation is to place an order in the final stage, and the pull will push the price up and down in a direction that is beneficial to you. SynFutures does not allow users to add new positions during the settlement period of the last hour in the market to minimize the possibility of price manipulation.

Contract security and gas consumption

SynFutures v1 smart contract has passed Peckshield audit.

Through the efforts of project engineers, compared with other derivatives agreements on the chain, the gas consumption required for SynFutures contract transactions is at the lowest level in the market. The average cost of each transaction is only about 200,000 Gas, and most of the existing derivative agreements consume Between 500,000 and 800,000, which is even lower than many DeFi spot trading agreements.

SynFutures has officially launched the Kovan testnet on February 4, 2021. For more detailed information about the product and smart contract design, you can check the white paper, technical papers and frequently asked questions on the project website. The team is eagerly looking forward to feedback from all parties and will reward constructive suggestions in the future!

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