Synth Mints + Burns

    Q58. Show the minting + burning of synthetic assets over time.

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    Introduction

    THOR Synthetic Assets

    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 as the original asset.

    Unlike Wrapped Assets, THORChain Synths are backed by THORChain Liquidity Pools, which contain 50% of the original asset and 50% $RUNE. THORChain Liquidity Pools ensure that the synth price always remains 1:1 with the native token price. Collateralization via pool ownership ensures always-on liquidity and pricing. In short, there is always a direct correlation between the Synth and the Assets which are being secured.

    Each minted Synth represents the LP ownership of the native asset. Essentially, 50% of the native asset will be sold to purchase $RUNE, while the pool maintains a 1:1 price correlation. Synth transactions is expected to increase THORChain TVL and open the gate to many future THORFi features.

    Mints and Burns

    When swapping RUNE for a Synth in its synthetic liquidity pool, an equivalent amount of the Synth will be minted.

    When swapping a Synth for RUNE in its synthetic liquidity pool, the Synth will be forever burnt and the equivalent amount of RUNE can be redeemed. Since Synths Assets are paired with real Assets, the RUNE can be directly swapped for the underlying real asset.

    Source

    Methodology

    Two CTE are created to gather the data referred to mints and to burns respectively following this structure:

    • block_timestamp::date as fecha is selected as time variable
    • from_asset as mint_asset / to_asset as burn_asset
    • count(distinct) as number of mints/burns
    • sum(to_amount) as volume in RUNE for each transaction
    • sum(liq_fee_rune) as mint/burn fees in RUNE

    Results

    Figures 1. and 2. show the number of transactions and total RUNE volume for mints and burns. A clear uptrend with saw-like profile can be seen, showing local tops in both metrics on March 27th, April 1st and April 6th. Data for April 12th when the analysis is made is incomplete.

    Although both metrics seem proportional at plain sight, it looks like burns are on average of slighty higher amount than mints. On March 25th and 26th, mints are higher than burns (2673/2699 vs 2432/2563) but volume is higher on burns than mints (1.45M/1.45M vs 1.50M/1.48M RUNE).

    Conclusions

    THORchain swap of synths has been increasingly gaining momentum and has a good forecast for the next future. Continuing with their strategy, Terra was added late March with the inclusion of LUNA and UST as Synths, being wuite succesful on THOR`s protocol. Binance Smart Chain is the leading blockchain followed by Ethereum y Bitcoin and Terra.

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    Note that since the swap is done always with RUNE, there is no need to add this information. The amount of swapped to RUNE is used to calculate mint volume and the swapped from RUNE as the burn volume.

    To identify these transactions, a where from_asset like '%/%' / where to_asset like '%/%' constraint is used.

    Both CTE are joined on the conditions m.fecha = b.fecha and m.mint_asset = b.burn_asset to show the final results. These will aggregate number of transaction, RUNE volume and fee volume by day and by asset, for both the mints and burns.

    Figures 6. and 7 show the normalized distribution of minted/burnt volume by network, showing similar trends as in figures above. The launch of Terra in THOR relegated Bitcoin to a fourth place while BNB and ETH fight for 1st place, being the former the usual winner. This is specially true for burned volume, were BNB is more dominant.

    Figure 5. shows net volume as mints minus burns. The majority of days, more RUNE is burnt than minted. On April 7th, almost 400k RUNE were minted as net volume, followed by short over 250k RUNE burnt on April 8th.

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    Figure 11. show the minted/burnt total fees in RUNE by day. This is extremely proportional to the minted/burnt volume and slighty less to number of transactions, so I assume the fees are dependant on volume rather than transaction. Low fees are a fact, since for around 3M in both volumes, fees are around 1300 RUNE (and almost 1650 RUNE respectively, below (0,1%).

    Figures 8. and 9. show the mint and burn fees disbritution by network. The trend is again to be seen but higher fees proportionally are paid on Ethereum and Terra, specially with mints, and BTC burn fees are higher than mint fees.

    Figures 3. and 4. show the minted/burnt assets by RUNE volume on a normalized bar chart. Until March 26th, the trend is that BUSD in Binance Smart Chain, BTC on Bitcoin and ETH and USDC on Ethereum are the most minted and burnt synthetic assets on Thor. Then, UST in Terra takes over some of the share of both BTC and ETH.

    Other traded assets with certain importance are LUNA on Terra, BTC and ETH on Binance Smart Chain and THOR and USDT on Ethereum.

    A curious situation happened on the first day with data, on March 9th, around 74% of the minted volume was ETH (in Ethereum and wrapped in Binance Smart Chain) and 24% was BTC on Bitcoin but almost 95% of burnt volume was BTC on Bitcoin and 4% was ETH (same chains as above).

    Figure 10. was added to evaluate the truth of statement above. While it is true that on March 25th and 26th average amount of mint transactions is lower than average amount of burns as suspected, there is no trend to favour one or the other direction.

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