THORSynths are here: Mint, Redeem, and Swap Synthetic assets
THORChain Native Synthetic assets with instant settlement, low gas and no risk of Impermanent Loss
Starting today, THORChads can finally Mint, Redeem, and Swap Synthetic Assets (“Synths”) on THORSwap!
What are Synthetic Assets (“THORSynths”)?
Synthetic Assets (“Synths”) are a collateralized representation of an asset on THORChain. These derivatives of cryptocurrencies such as Bitcoin, Ethereum, etc will always have the same value as the original asset.
Unlike Wrapped Assets, THORChain Synths are backed by THORChain Liquidity Pools, which contain 50% of the original asset and 50% $RUNE. THORChain Liquidity Pools ensure that the synth price always remains 1:1 with the native token price. Collateralization via pool ownership ensures always-on liquidity and pricing. In short, there is always a direct correlation between the Synth and the Assets which are being secured.
What can Synths be used for?
Synths have great utility for traders and arbitrageurs, as they can be transacted nearly instantly and at a fraction of the cost compared to native L1 swaps. This is due to the fact that synths solely live on the highly-scalable THORChain network (so no need to worry about different chains, gas prices, wallets). In the future, it will allow THORChads to also earn yield with Synths thanks to vaults and provide other exciting THORFi utilities.
From the THORChain Docs:
“THORChain synthetic assets are primitives for both higher-order financial features, as well as fully-secured, fully-backed synthetic assets that can be sent anywhere in the Cosmos IBC ecosystem and they will always retain the guarantee they can be redeemed for the underlying.”
Each minted Synth represents the LP ownership of the native asset. Essentially, 50% of the native asset will be sold to purchase $RUNE, while the pool maintains a 1:1 price correlation. Synth transactions is expected to increase THORChain TVL and open the gate to many future THORFi features.
When minting a Synthetic Asset such as sETH or sBTC you’re essentially adding $RUNE to a liquidity pool for a Synthetic Asset of that pool.
This process is known as Minting.
To redeem a Synthetic Asset you will need to swap it for $RUNE. The Synth will then be burned forever, this process is known as “Redeeming” or “Burning”. A synthetic asset can be redeemed for RUNE at any time on THORSwap.
Synths Assets are paired with real Assets holding the same value and can be redeemed 1:1.
e.g Swap BTC for RUNE then mint Synthetic BTC will give you 1 Synthetic BTC.
The Synthetic BTC can later be redeemed by swapping to RUNE and swapping for 1 BTC.
As the same with Minting and Redeeming, all Synth transactions involve the use of native $RUNE.
Synth holders do not experience any gain or any loss caused by price changes when minting / redeeming a synth. They do, however, pay a slip-based fee on entry or exit and standard low THORChain transaction fees (paid in $RUNE).
L1 to Synth Minting and Redeeming
THORSwap also provides a simple process to mint and redeem Synths from L1 assets. This essentially involves a double swap, your L1 asset (i.e. $BTC) will be swapped automatically to $RUNE, and then minted to sBTC in the same transaction. Redeeming also works the same way, your sBTC will be sold to $RUNE to the correct value and then swapped for native $BTC and sent to your native wallet address.
All of this happens seamlessly in the background - just be aware that sending and receiving L1 assets will incur transaction (gas) fee of the respective native chain.
TL;DR: Synths are simple, easy and cheap
• 5 Second confirmation Time
• Fixed 0.02 $RUNE outbound (tx) fee
How to Mint / Redeem THORSynths on THORSwap:
To acquire THORSynths, the first step is “Minting.” To do so, visit THORSwap and click on “Swap”, after the Swap tab is open simply input RUNE as the input asset, and the SYNTH (e.g sBTC) as the output asset.
You can now redeem or “Burn” your sBTC for RUNE or any other L1’s on THORSwap. Simply input your SYNTH (e.g sBTC) as the input asset, and your desired asset as the output asset. This process will burn your Synth asset for your desired asset.
Synthetics will increase network usage, network TVL, pool depth, thus cheaper swap fees, and generate greater income for liquidity providers.
Synthetics were activated by a 2/3 majority of distributed node operators voting to change a network (Mimir) setting demonstrating THORChain’s decentralisation. Synths launch with a precautionary limit of 5% of the asset depth. This can be increased up to 16.5% of the asset depth by node operators over time.
For a deeper dive into Synths, check out the video series by GrassRoots Crypto.
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