On May 30th, Synthetix officially announced that in order to facilitate the re-anchoring of sUSD to the US dollar at 1:1, starting from 23:59 UTC on June 2nd, SNX stakers need to increase their sUSD deposit ratio from 10% to 20%. Only when this condition is met can they continue to enjoy the jubilee policy.
Recently, some debt collateralists, after obtaining debt relief, sold off a large amount of sUSD in their hands, causing a significant fluctuation in the price of sUSD, which once plummeted to $0.70, seriously deviating from its anchor target of 1:1 to the US dollar. Facing this severe situation, Synthetix acted promptly and stabilized the sUSD price to a certain extent by implementing a series of measures, such as setting a 10% deposit requirement, etc., bringing it back to $0.96. However, to fully achieve the precise anchoring of sUSD to the US dollar, there are still numerous difficulties and challenges.
The Synthetix stablecoin mechanism relies on the over-collateralization of SNX. Users stake SNX to mint sUSD and bear the risk of fluctuations in the system’s debt pool. Under the old mechanism, a mortgage rate as high as 750% and debt repayment incentives jointly maintained the stability of sUSD. However, the SIP-420 proposal shifts the individual staking model to a centralized debt pool. Although it theoretically injects long-term potential into the ecosystem, the transition period disrupts the original balance. The new mechanism is not yet mature, the old anchoring repair function is shelving, and sUSD loses its self-regulating ability. In addition, market participants have been selling sUSD in a concentrated manner on decentralized exchanges such as Curve to exchange for other stablecoins like USDT and USDC. The imbalance between supply and demand in the market has led to continuous pressure on the price of sUSD.
Synthetix also stated that once it successfully stabilizes the sUSD price, it will fully promote core plans such as the 420-pool operation and perpetual contracts on the Ethereum mainnet in the future. Pool 420 aims to increase the demand for sUSD by incentivezing SNX stakers to deposit sUSD and offering high rewards, thereby promoting the price to return to the $1 anchor.
The core mechanism is as follows: Only existing SNX stakers (who have participated in 420 Pool or other Synthetix staking) can deposit into sUSD. New stakers need to wait for the subsequent stage to open. Stakers deposit sUSD into the sUSD 420 Pool and lock it in exchange for rewards. The reward pool, which totals 5 million SNX per year, is proportionally distributed to stakers who deposit sUSD. The rewards last for 12 months. The deposited sUSD is managed by the protocol and is used to provide liquidity or seek income opportunities. A portion of the proceeds is used to repurchase SNX or distribute it to stakers to enhance the system’s capital efficiency. After depositing sUSD, stakers can withdraw at any time, but they need to go through a 7-day cooling-off period to withdraw SNX or sUSD. Early withdrawal may affect the reward distribution, but it will not affect the principal of the sUSD already deposited.
In the current cryptocurrency market, the price stability of stablecoins is of vital importance. As the core stablecoin of the Synthetix ecosystem, the restoration of sUSD’s anchoring not only concerns the development of Synthetix itself but also has a certain impact on the stability of the entire cryptocurrency market. This increase in the sUSD pledge requirements for debt mortgagors is an important effort made by Synthetix to restore the sUSD anchoring. The market will closely monitor the implementation effect of this measure and whether the sUSD price can return to the 1:1 anchoring state with the US dollar as expected.
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