State of SynFutures Q1 2024

Key Insights

• SynFutures V3 recorded over $9 billion in trading volume in its first month after launch, positioning it as the eighth-largest perpetual DEX as it surpassed competitors like Synthetix and Drift. Recently, SynFutures has ranked among the top three most popular perpetual DEXs by volume.
• V3 reached a TVL of $44 million, partly due to incentive programs like Oyster Odyssey and Blast Gold points.
• SynFutures captured 83% of Blast's volume market share by the end of Q1.
• The Oyster AMM model, which integrates concentrated liquidity and limit orders, operates as a permissionless, fully onchain order book, proving to be a key differentiator and driving increased platform usage.

Primer

SynFutures V3 is a decentralized derivatives exchange deployed on Blast.  Though the platform has yet to launch a native token, the SynFutures team is considering it and recently secured $22 million in a Series B funding round spearheaded by Pantera Capital. SynFutures V3 utilizes a comprehensive derivatives market-making model that combines the benefits of order book and AMM models. This is achieved by providing capital efficiency on par with centralized platforms. The Oyster AMM integrates the features of a traditional order book, moving away from the traditional matching process from AMMs. With a single token liquidity provision, this permissionless model allows listing pairs with any asset as collateral and allows users to trade any quote asset against any collateral asset. Theoretically, it provides users with the flexibility to pair any combination of pairs against each other. In addition, order management, matching, and executions occur fully onchain, unlike alternative models that depend more heavily on centralized controls. This approach ensures a more secure and resilient trading environment.

This system treats liquidity provision as an independent AMM centered on the underlying asset's current price. In the Oyster AMM, each concentrated liquidity position functions as an independent AMM adhering to its constant product model. Volume allocation is determined by the liquidity available within each concentrated position across the specified price range. Liquidity providers (LPs) define the breadth of their price range, and native limit orders are set at discrete price points and become irreversible once executed. This ensures atomic transactions and gives makers clear confirmation of the status of their orders.

The Oyster AMM employs a smart contract structure called "Pearl," which maintains individual concentrated liquidity positions and open limit orders at a particular price point. Each "Pearl" on the AMM price curve represents a market depth at that price. When trades occur, limit orders are filled first, minimizing slippage and allowing the Oyster AMM to rival the efficiency of centralized exchanges. The mechanism reduces margin requirements, enabling up to 100x leverage in trading. To safeguard LPs and makers against market volatility, it incorporates a dynamic penalty fee system that adjusts fees based on the deviation between the fair and mark prices from Pyth oracles, thus compensating liquidity providers during significant price movements. For the purposes of this report, we will focus strictly on V3 data, as V1 and V2 were deprecated this February.

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Key Metrics

Performance Analysis

Network Overview

Synfutures V1 and V2 were deprecated this February in preparation for their V3 launch. V1 and V2 averaged $13.5M in daily volume with 945 daily unique addresses. Since its launch, V3 saw 646 unique addresses with $295M in average daily volume.

February 29 marked the mainnet launch of SynFutures V3. In March, SynFutures recorded over $9 billion in trading volume. It ranked eighth among all perpetual DEXs, significantly ahead of Synthetix ($5.3 billion) and Drift ($5.2 billion). Recently, SynFutures has ranked among the top three most popular perpetual DEXs by volume. The trading volume steadily increased throughout March, peaking at $750 million on the quarter's final day. Daily unique addresses ranged from 300 to 1,200, with a median of 492.

As one of the winners of Blast’s Big Blast competition, SynFutures was the first perp DEXs live on Blast and kicked off the launch with their Oyster Odyssey (O_O) points program. Rewards included Blast Gold rewards, distributed every two weeks subject to Blast’s frequency and O_O points proportional to users’ trading volume. Makers and takers earn Blast points for margin deposits and LP positions at the same rate per TVL as Blast yield.

The Oyster AMM model on SynFutures combines concentrated liquidity and limit orders, reducing protocol risk when listing long-tail assets and enhancing capital efficiency by requiring only one set of margin to provide liquidity on both sides of the pools. This approach has proven highly efficient, as SynFutures recently surpassed leading perp DEXs dYdX and HyperLiquid in daily trading volume with significantly less TVL. For context, dYdX's TVL is around $450 million.

The most traded quote assets on SynFutures are Bitcoin and ETH, accounting for over 90% of total trades. USDB (Blast's yield-bearing stablecoin) is the most utilized margin asset. Other popular quote assets include Boden, DEGEN, and WIF, which originate from blockchains other than Blast's. This diversity highlights SynFutures' ability to leverage attention and capture mindshare from other ecosystems.

In March, SynFutures V3 only had four days with net outflows. Spikes in TVL and daily active addresses coincided with O_O announcements and its Grand Prix trading competition. Popular crypto traders such as CMS Holdings, CL, and Awawat Trades were tagged as participants in the competition. Ending on May 7, a prize pool of $500,000 was allocated to two different pools of the Trading Grand Prix, incentivizing all types of users to the platform.

In Q1, SynFutures initiated the O_O and Blast Gold points incentive programs. The first distribution round of these programs wrapped up on March 26. On the same day, SynFutures ramped up the point increments for the wETH/USDB and BTC/USDB pools in the O_O competition by 200x, leading to a $24 million increase to $44 million (120%)  in TVL in a single day. USDB (Blast’s native stablecoin) now represents 60% of the total TVL, with wETH accounting for the remainder.

Ecosystem Analysis

As of March 31, SynFutures commanded an 83% market share on the Blast network, calculated from total volume in the month of March. While competitors like Vertex’s Edge and Blast Futures also facilitated billions in trading volume during March, SynFutures continued to lead the ecosystem. Given the recent launch of Blast, more perpetual DEXs likely will join the ecosystem as the network continues to grow. SynFutures regularly accounts for around 5-10% of all Blast transactions. Nonetheless, SynFutures currently holds the majority market share and aims to capitalize on its strong start.

Qualitative Analysis

In Q1, SynFutures’ major milestone was its V3 launch. This February, it deprecated its V2 deployed on Polygon mainnet and zkSync Era. For reference, SynFutures V2 facilitated $3.78 billion in 2023. Its V3 facilitated $9 billion in one month. Launching on Blast, the seventh-largest smart contract platform by TVL has proven to be a significant differentiator for SynFutures. Although platforms like Polygon and zkSync Era have their own successes, SynFutures has capitalized on Blast's strong mindshare and user base to boost its own launch.

Winning the Blast Big Bang competition brought additional rewards for the exchange and its users. The unveiling of its points program and token launch further incentivized traders, significantly increasing platform activity. Following these announcements, SynFutures attracted 15,000 unique addresses within 18 hours and reached 50,000 within 36 hours.

Technical Upgrades

As mentioned, Synfutures’ key features include single-token concentrated liquidity, a fully onchain order book, and a single model for unified liquidity. Its V1 enabled LPs to add liquidity to a trading pair with a single token, and its V2 expanded upon this by adding new methods of liquidity provision. SynFutures V3 emphasized capital efficiency, which requires only one set of margins to provide liquidity for both sides.

To enable this feature, V3 uses each concentrated liquidity range existing as an independent AMM. Each liquidity pool only supports a specific price range. If the AMM price were to deviate from that range, anyone could remove that liquidity and convert it into a trading position. In turn, the trading position would go to the account of the original owner of the concentrated liquidity. As a result, protocol capital would be more efficient as the LP can then manage the trading position as desired instead of letting the net position sit idle.

Unlike V2, the Oyster AMM has lower margin requirements but is balanced out by a dynamic penalty fee framework. The framework works by increasing the fees paid to liquidity providers if a trade results in significant deviations between the fair price and the mark price.

On the ecosystem front, SynFutures integrated Chainlink price feeds on V2 in early January in preparation for its V3 integration. It created the Oyster moderator program to enhance a vibrant community by allowing power users to interact with the overall ecosystem. Additionally, it established a connection with Binance’s Web3 wallet to SynFutures V3, allowingt users to interact seamlessly with the Oyster Odyssey competition.

Closing Summary

SynFutures V3 has marked a successful quarter with its launch on February 29 and its subsequent impressive Blast network performance. In March, the platform achieved over $9 billion in trading volume, significantly outpacing competitors like Synthetix and Drift and establishing itself as a dominant player in the perpetual DEX arena. Recently, SynFutures has consistently placed in the top 3 perp DEXs by 24-hour volume. Notably, integrating the innovative Oyster AMM model, which merges concentrated liquidity with limit orders, has allowed SynFutures to offer enhanced capital efficiency and reduced protocol risk, contributing to its competitive edge.

The platform's strategic incentive programs, such as the Oyster Odyssey and Blast Gold points, have effectively driven user engagement and TVL growth. By the end of March, SynFutures led with an 83% market share on Blast and showcased its capability to attract substantial trading volumes with a much lower TVL than its peers. The first quarter's success was punctuated by strong community engagement and participation in various competitions and trading events, which bolstered daily active users and further solidified SynFutures' position within the ecosystem.

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