The creator of the decentralised finance (DeFi) system Synthetix, Kain Warwick, has filed a proposal that would stop SNX stakers from getting very high yield returns and limit the total amount of Synthetix (SNX) to 300 million.
On the Ethereum and Optimism networks, the Synthetix protocol enables traders to issue synthetic replicas of crypto-native assets, conventional financial assets, and commodities.
Warwick indicated in a Thursday Synthetix Improvement Proposal (SIP) that the original intent of SNX reward inflation was to “bootstrap the network.” He says, though, that they no longer need to do this because they can get steady fee returns from atomic swaps.
The DeFi protocols’ adoption of the Synthetix platform for atomic swaps has resulted in a significant increase in the protocol’s fee income, as well as an increase in traffic. In June, the protocol’s daily fees topped $1 million, which was four times the amount Bitcoin made.
According to cryptofees, Synthetix is raking in a seven-day average of $158,857 in fees, which is somewhat less than Bitcoin’s average of $222,651.
Stakers get all stablecoin transaction fees from protocol users. Currently, the yearly percentage yield for stakers owing to SNX incentives plus sUSD fees is around 67%. However, this is anticipated to decrease to between 15% and 20% if based only on “actual yield” from sUSD fees.
In a Thursday Twitter post, Warwick, who is also regarded as the “father of modern agriculture” for popularising DeFi yield farming, expressed his belief that aeSIP-276: Turn off the money printer had a “good chance” of being passed based on informal conversations. A formal presentation about the idea is scheduled for next week.
If the Synthetix governance community approves SIP-276, 10 monthly payments of 675,000 SNX tokens will be added to the current total supply of 293 million tokens to reach the 300 million milestone before permanently stopping inflation.
A Twitter user viewed the news as extremely positive, tweeting, “#SNX is poised to become a rare commodity with inflation heading to ZERO.” Others aren’t sure what long-term effects SIP-276 might have on the protocol.
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Synthetix will soon stop giving out SNX tokens. Delphi Digital, an analyst company, said that the protocol had to keep its current users and “attract new users with organic income in a market where yield is available.”
It’s still not clear if DeFi protocols like Synthetix can get enough stakers if they only make money from fees or how stopping SNX inflation would affect the price of SNX tokens, which are currently worth $3.04, up 10.5% from last week.
Warwick also said that there will be a formal presentation about SIP-276 the following week. If it is approved, it will be added to Synthetix’s governance structure.