SIP-301: Add Synth Supply Caps

Author	Spreek
Status	Draft
Type	Governance
Implementor	TBD
Release	TBD
Discussions-To	https://research.synthetix.io
Created	2021-06-09

Implementor

Simple Summary

Allow each synth to have its own maximum supply cap, above which no more of that synth may be minted.

Abstract

The SIP will add a check on exchanges that will check to see if a given trade will mint synths such that its total supply exceeds the supply cap for that synth (as set by SCCP). If the trade will result in synths being minted above the supply cap, the trade will fail. Otherwise, the trade will proceed as usual.

Motivation

We have been expanding the total supply of synths and also steadily expanding our offerings of possible synths. This presents a variety of possible attacks and risk factors for the system and for SNX stakers.

One issue of particular concern is the ability for actors to acquire large amounts of synths relative to the total market cap or trading volume of that synth. For example, it would be quite possible for someone to acquire $100m of sREN in 6 minutes, while REN the underlying is an asset with 500m fully diluted valuation and daily trading volumes on CEX of far below $100m. This presents opportunities for manipulators to attack the system by manipulating price of these less liquid synths after establishing a huge position in them.

Even without this possibility of manipulation, allowing these massive positions that are far beyond what any reasonable staker could hedge on the open market poses an unacceptable risk to stakers, who are exposed to potentially large swings in debt.

Therefore, it is desirable that each synth have a parameter, set by SCCP, that governs how much of that synth may exist at any time. This means that we can more easily regulate the change in the debt pool and, at a minimum, prevent massive positions from being acquired near instantly. While I do propose that all synths have this feature enabled, its likely that most synths can remain at a very large cap.

Specification

TBD

Overview

TBD

Rationale

Technical Specification

Test Cases

TBD

Configurable Values (Via SCCP)

Each synth has its own supply cap, modifiable by SCCP.

Broadly speaking, I recommend classifying synths into the following categories:

Very at risk synths (sREN, s1inch, sETC, sCEX) --> target initial cap of <10m USD)
High risk synths (sYFI, sTRX, sXTZ, sDASH, sRUNE, sXMR, sEOS, sCOMP, sCRV, sDEFI) --> target initial cap of <25m USD
Medium risk synths (sAAVE, sDOT, sADA, sBNB, sUNI, sXRP, sLTC, sLINK) --> target initial cap of <50m
Low risk synths (sETH, sBTC, sEQUITY, sFOREX, sCOMMODITY) --> likely no cap needed at this time

So some rough suggestions (unless otherwise mentioned, assume iSynth caps if applicable are the same as the sSynth):

sREN / Proposed cap 5m sREN (~$2.5m at current market price)
sRUNE / Proposed cap 2.5m sRUNE (~$25m at current market price)
sYFI / Proposed cap 360 sYFI (~$15m at current market price)
sAAVE / Proposed cap 100k sAAVE (~$36m at current market price)
sDOT / Proposed cap 2m sDOT (~$42m at current market price)
sXMR / Proposed cap 90k sXMR (~$24m at current market price)
sDEFI / Proposed cap 2000 sDEFI (~$25m at current market price)
sETC / Proposed cap 100k sETC (~$6m at current market price) <-- judging to this synths risk of 51% attack, very long deposit times on exchanges, and history of price feed manipulation, I suggest keeping this cap lower.
sADA / Proposed cap 32m sADA (~$50m at current market price)
sEOS / Proposed cap 5m sEOS (~$25m at current market price)
sBNB / Proposed cap 150k sBNB (~$50m at current market price)
sCRV / Proposed cap 10m sCRV (~$22m at current market price)
sTRX / Proposed cap 200m sTRX (~$14m at current market price)
sUNI / Proposed cap 20m sUNI (~$50m at current market price)
sCOMP / Proposed cap 50k sCOMP (~$18m at current market price)
sCEX / Proposed cap 1000 sCEX (~$6m at current market price)
sLTC / Proposed cap 300k sLTC (~$50m at current market price)
s1INCH / Proposed cap 2m s1inch (~$6m at current market price)
sXTZ / Proposed cap 5m sXTZ (~$17m at current market price)
sDASH / Proposed cap 100k sDASH (~$17m at current market price)
sXRP / Proposed cap 60m sXRP (~$52m at current market price)
sLINK / Proposed cap 4m sLINK (~$96m at current market price) <-- sLINK already has substantial market interest of over 2.2m sLINK, and it also has a significantly more responsive oracle than the other altcoins. Therefore a somewhat higher initial cap is justified.