THORSynths 101
THORSynths Frequently Asked Questions
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THORSynths Frequently Asked Questions
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TL;DR for LPers Introduction of THORSynths effectively increases LPers exposure to RUNE. LPers enjoy profits if RUNE price goes up, and suffer losses if it goes down. However, thanks to THORChain’s slippage-based fee, LPers enjoy an asymmetric upside by underwriting Synths, as long as RUNE price doesn’t vary significantly relative to the other pooled asset. This asymmetric upside is greater in shallow pools.
What are 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 of the original asset.
How are Synths different from Wrapped Assets? Synths are backed by 50% of the original asset and 50% $RUNE. THORChain Liquidity Pool ensures that the price always remains 1:1 with the native token price. In short, trust in the network aside, there is a direct correlation between the Synth and the assets which are being secured.
What are the benefits of Synths? Lower fees and faster transactions when trading. They can also be swapped for any other token or synthetic token available in THORSwap.
What can Synths be used for? Synths can be used for cheap & fast trading on THORSwap and arbitrage opportunities (you only interact with THORChain, 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 other THORFi applications.
What are the fees for Minting/ Swapping/ Redeeming Synths? All Synth transactions involve the use of native $RUNE, this means Synth holders do not experience any gain or loss due to 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).
Will I suffer Impermanent Loss when holding Synths?
There is NO Impermanent Loss when holding Synths due to the collateralization method. In essence, THORSynths are impervious to IL and offer single asset exposure.
What are the benefits for the ecosystem? The minting of each Synth represents the LP of a native asset. Essentially, 50% will be sold to purchase $RUNE, leading to positive price action. Synth transactions will also increase THORChain TVL and open the gate to many future THORfi features.