Synthetix solves the “cold start” problem for developers of new DeFi apps.

“How do we get liquidity deposits when the app launches?”

In other industries such as Forex, liquidity and exchange operators are two different businesses. Exchanges build their app with the best user functionality, and liquidity is equal across different platforms. This process is called “white labeling” and its the de facto business model for many Forex exchanges

DeFi is weird though, as liquidity is forcibly split between protocols and apps.

Our industry relies on massive airdrops, points programs or other monetary incentives as quasi marketing to attract assets into their platform.

Projects have to run a dual strategy of building and raising capital at the same time to compete with established incumbents. The quality of apps may suffer as a result if team priorities are split.

Synthetix solves this problem by creating a new liquidity layer so that devs can focus on creating fascinating user experiences.

Developers are empowered to create whatever type of market they can think of for people to trade, gamble, insure or invest, all backed with Synthetix's liquidity.

Pic c/o @picoloresearch

The core Synthetix liquidity enables Trading markets, which can power perpetual options, options, NFT perps, sports betting, binary options, prediction markets and more.

Other non-trading markets like permissionless casinos, insurance and other non-financial types can also be built on top.

Synthetix's “customer” is not really the end traders, rather it's the apps which are built on top of its liquidity layer and then go out and market to onboard traders. It's a B2B2C model, very similar to how Forex works.

Revenue is earned on the trading volumes and liquidity usage from all apps enabled by the liquidity pools. Currently, 80% of all fee revenue is passed back to the SNX DAO and pools in the form of buyback and burns and fee distribution. The splits are set by governance and can be changed if apps are not earning enough revenue.

Right now each network (OP, Arbitrum, Base) has its own liquidity pools, with different capabilities. sUSD can be minted on Optimism, USDx on Arbitrum and minting is prohibited on Base. These pools limit the risk of the apps built on top to a single network, but this also splits liquidity across networks with less efficiency.

In the future, Synthetix is planning to launch its own L2, which might, in the future, be able to centralize all liquidity on one chain for apps to use, no matter what network they are on.