Synthetix's latest progress analysis: Are DeFi derivatives still a good business?

Compiled: Scof, ChainCatcher

Original author: Troy Harris, Messari

Original title: " State of Synthetix Q4 2024 "

This article is a compilation and analysis of Synthetix's performance in the fourth quarter of 2024. The content is compiled based on the original materials released by Messari, covering its main progress in governance structure, product layout, transaction activity, market data and financial status.

The article aims to provide readers with a concise and data-driven reference content to help understand the performance and trends of Synthetix in the current market environment.

Key Insights

• In the fourth quarter of 2024, Synthetix implemented governance reforms and adopted a single Spartan Council model to simplify the process.
• The acquisition of Kwenta and TLX for $13.2 million and $4 million is expanding its derivatives product line.
• On November 21, open contracts reached an annual peak of US$67.1 billion; quarterly average daily average was US$195.4 million, a 45% increase from the previous quarter.
• 68 new perpetual contracts have been launched, of which 24 are the first-time platform support assets.
• The average daily trading volume of perpetual contracts reached US$71.7 million, a month-on-month increase of 29%.

Key indicators

Protocol Analysis

Perpetual contract

The average daily perpetual trading volume in Q4 was US$71.7 million, an increase of 29% from Q3, but a decrease of 50% year-on-year.

V3 perpetual contract usage slowed down, with trading volume down 38% month-on-month.

The total transaction volume in Q4 was US$6.6 billion, accounting for 0.9% of the total perpetual transaction volume on-chain (US$740.5 billion).

SOL's perpetual contract transaction volume increased by 53% in the quarter, surpassing BTC to become the platform's largest market. BTC ranked second, and the proportion of ETH trading declined.

Other perpetual market transaction volume increased by 74%.

The platform has added 68 new perpetual contract markets, 24 of which are first-time supporting assets and are launched in accordance with the requirements of SIP-387.

User activity

Synthetix's overall activity indicator rebounded in the fourth quarter after experiencing a full-year decline in 2024.

The average daily transaction number of perpetual contracts increased by 25% month-on-month, up from 1,400 in the third quarter to 1,700 in the fourth quarter. The growth in the quarter was driven mainly by Synthetix V2, with transactions up 59% month-on-month.

But from a year-on-year (YoY), the average daily transaction number fell by 33% from 2,500 in the fourth quarter of 2023.

The average daily active user count (DAUs) increased by 14% in the fourth quarter, from 207 in the third quarter to 236. However, compared with 445 in the fourth quarter of 2023, a year-on-year decrease of 47%.

The average daily active users of Synthetix V2 and V3 both achieved growth, up 12% and 19% month-on-month respectively. This shows that core users account for a larger proportion of transactions on Synthetix.

It should be noted that Synthetix V3 has not been deployed to the OP Mainnet and currently only runs on the two execution layers, Base and Arbitrum, so its activity data comes from different Layer 2 network environments.

Total locked value

Total locked value (TVL) is an important indicator for measuring the liquidity available to Synthetix on a specific chain.

In the fourth quarter, Synthetix's TVL remained basically stable, with a month-on-month increase of only 1%. TVL once peaked above $600 million this quarter, and finally ended with $378.9 million.

Although TVL is an important reference metric for measuring the size and liquidity of a protocol, it is not the only criterion for measuring the success of a perpetual contract decentralized exchange (perp DEX).

Open position

Open Interest (OI) represents the total value of a derivative contract that is still active at a specific point in time. For Synthetix, OI represents the total dollar amount of all currently unsettled perpetual contracts. Higher OI means higher exposure (more funds are locked in positions), and on the other hand, it also reflects strong demand for Synthetix perpetual contracts, as this indicates that users are actively opening positions and maintaining positions.

As of the end of the fourth quarter, Synthetix's OI was $67.5 million, a 60% decrease from the previous quarter ($166.7 million in Q3). However, on November 21, OI hit an all-time high (ATH), reaching $376.1 million due to intensified market volatility. The average daily OI throughout the fourth quarter was US$195.4 million, a 45% increase from US$134.8 million in the previous quarter. OI showed an upward trend before the U.S. presidential election, with OI reaching US$208.9 million on November 5 (the day of the election). With Donald Trump's election, the crypto market ushered in a round of rising markets. While prices are rising, investors' risk appetite has also increased, driving the activity of leveraged trading and driving the continued rise of open contracts.

In the perpetual contract market, SOL was the highest asset with average open contracts for the first time this quarter. Its monthly open contracts in the fourth quarter were US$84.9 million, an increase of 115% from US$39.4 million in the third quarter. SOL accounted for 43% of the total average OI in the fourth quarter. BTC ranked second in the average open contract this quarter, with its perpetual contract market having an average monthly OI of $77.6 million in the fourth quarter. SOL and BTC together accounted for 83% of the total average open contracts in the fourth quarter. In contrast, ETH's perpetual contract market average open contracts declined for the second straight quarter, partly due to the relatively weak price performance of ETH in the fourth quarter compared to other crypto assets. The average OI of ETH was $15.2 million, down 27% from $20.7 million in the previous quarter.

Processing fee

When a trader's order reduces market skew, that is, alleviates the imbalance between long and short positions, a pending order fee will be charged; and when the order exacerbates the market skew, a pending order fee will be paid. The order fee and order fee are set separately according to the specific market and can be viewed in the trading interface. The above fees are collectively referred to as exchange fees. In addition, if the trader's collateral is not worth enough to maintain his or her perpetual contract position, he or she may also face forced liquidation fees.

Synthetix's deployment on the OP Mainnet remains the core source for almost all perpetual contract transaction fees and clearing fees in all deployments. On the OP main website, transaction fees are not directly issued as dividends, but are achieved by destroying sUSD, thereby reducing the debts of SNX pledgers. However, according to the update of proposal SCCP-373, the transaction fee allocation mechanism of Synthetix perpetual contract is adjusted to:

• 20% for V2 debt destruction
• 20% allocated to integrated parties, such as Cyberdex, etc.
• 60% of liquidity providers (LPs) allocated to Synthetix V3

In the fourth quarter of 2024, the total perpetual contract transactions and clearing fees on the OP main network reached US$2.8 million, a 64% increase from US$1.7 million in the third quarter. Relatively speaking, the handling fees on the Base network fell 47% month-on-month, with the total handling fees in the fourth quarter being US$268,100. As for Synthetix's deployment on Arbitrum, since its launch at the end of August 2024, the fee revenue has been low until it received a total of $69,100 in the fourth quarter.

Overall, the average daily handling fee for all deployments of Synthetix was US$34,400, an increase of 42% from the previous quarter. But from a year-on-year perspective, the average daily handling fee fell 67% compared with US$104,900 in the fourth quarter of 2023.

If you only observe the perp exchange fees for perp contracts: The SOL perp contract market generated the highest revenue in the fourth quarter, with transaction fees reaching US$988,900, a 52% increase from the previous quarter. The BTC perpetual contract market ranked second with USD 748,900, up 22% month-on-month. Meanwhile, ETH's transaction fees fell by 31% month-on-month, reflecting that Synthetix's perp users gradually prefer to trade other asset markets in the fourth quarter.

Financial Analysis

Market value and supply

During the overall market growth period, SNX's circulation market value rebounded in the fourth quarter, up 26% month-on-month, from $517.6 million to $649.8 million. In addition, the SNX token price rose from US$1.58 to US$1.91, up 21% month-on-month, indicating that the market has successfully absorbed about 4% of the SNX additional issuance volume this quarter. The newly issued SNX this quarter was mainly used to fund two strategic acquisitions completed by Synthetix DAO (see below for details).

Other Progress

• Support mobile transactions in December, integrating fiat currency deposit and withdrawal and free gas experience.
• Synthetix Exchange was upgraded in December to improve interface and handling fee efficiency.
• Introduced one-click Gas-free trading function.
• V3 perpetual contracts support multi-collateralized assets.
• SNX is included in the Coinbase 50 index.
• The new official website is online, with unified access portals and product aggregation.

Summary and review

This quarter marks a significant change in the governance level of Synthetix protocols. DAO has officially moved to a single Spartan Council governance structure consisting of partial elections and partial appointments. The new council is committed to addressing the inefficiency of governance in the past and to promote the long-term development of the agreement under a unified vision. The new governance structure has been working quickly, promoting and completing two token-based acquisitions of Kwenta and TLX. These acquisitions help Synthetix achieve vertical integration and expand its product matrix.

Total open contracts hit an annual high for the quarter, reaching $376.1 million on November 21 and closing at $67.5 million at the end of the quarter. Perpetual contract trading volume increased by 29% this quarter to US$6.6 billion, while TVL remained basically stable, up only 1% month-on-month.

On the other hand, the average daily open contract increased by 62% to US$195.4 million. The average daily active user number (DAU) increased by 14% month-on-month, and the average daily transaction number increased by 25%. By introducing a new and simplified market creation process, Synthetix successfully launched 24 new perpetual contract markets in the fourth quarter. SNX's circulating market value increased by 26% month-on-month this quarter, reaching US$649.8 million at the end of the fourth quarter.