Simple Summary
Synthetix Acquires Derive.
Abstract
This proposal outlines Synthetix’s acquisition of Derive via an SNX-for-DRV token swap. Synthetix will integrate Derive’s existing product suite (options, perps, structured products) and leverage its technology to launch a highly performant L1 exchange. Synthetix will also acquire Derive’s treasury, operations, and technology. This proposal will require dual approval from Derive’s governance and Synthetix’s Spartan council. It aims to create a win-win scenario for both projects by combining complementary skillsets.
The transaction is structured as follows:
- Exchange Ratio: 27 $DRV <> 1 $SNX, reflecting an approximate $27 million valuation.
- Derive Circulating Supply: 790,993,522 $DRV.
- Vesting Terms:
- ≤1m $DRV = $SNX tokens vest immediately
- >1m $DRV = $SNX tokens received from the conversion of $DRV will be subject to a 3-month lock-up period, followed by a 9-month linear vesting schedule.
- Valuation Basis: The transaction price is set at an 8% discount to the spot $DRV/$SNX exchange ratio at the time of the proposal. This reflects the relative liquidity of both assets (SNX trades $25m per day, DRV trades <$100k per day).
- Funding: To facilitate the acquisition, Synthetix will issue up to 29.3m new $SNX tokens.
Motivation
Derive, launched in 2021 as Lyra, has established itself as a leader in onchain derivatives, achieving $16b in notional trading volume and 70% options market share. The primary reason for this success has been the creation of a highly performant exchange architecture, consisting of Derives own chain, protocol and exchange. However, despite product excellence, the DRV token (formerly LYRA) has struggled to gain traction. This is primarily due to Derive’s focus being centred on product and technology instead of tokenomics.
Synthetix is in the opposite position, with a liquid token but have struggled with their product and technology execution. For Ethereum to thrive, execution and liquidity must return from the fragmented L2 ecosystem to L1 and a hybrid exchange architecture - with settlement and protocol logic onchain and pricing and matching offchain, is the way forward. The stack Derive currently has in production is well-suited to this task and will enable Synthetix to launch much faster than if development is pursued independently. As such, we see this proposed acquisition as a win-win situation.
Specification
This acquisition encompasses the entirety of Derive’s treasury, operations and technology.
Transaction Structure
- Exchange Ratio: 27 $DRV <> 1 $SNX, reflecting an approximate $27 million valuation.
- Derive Circulating Supply: 790,993,522 $DRV.
- Vesting Terms:
- ≤1m $DRV = $SNX tokens vest immediately*
- >1m $DRV = $SNX tokens received from the conversion of $DRV will be subject to a 3-month lock-up period, followed by a 9-month linear vesting schedule.
- Valuation Basis: The transaction price is set at 8% discount to the spot $DRV/$SNX exchange ratio at the time of the proposal. This reflects the relative liquidity of both assets (SNX trades $25m per day, DRV trades <$100k per day).
- Funding: To facilitate the acquisition, Synthetix will issue up to 29.3m new $SNX tokens.
*A snapshot of DRV and stDRV balances at the time the proposal was created will be used, to avoid larger holders gaming the mechanism by splitting funds into different wallets. The unstaking period and fee for stDRV will be set to 0.
Product
Repurpose Derive Platform
Upon acquisition, Derive’s current platform will be repurposed under the Synthetix Brand:
- Derive Chain —> Synthetix Chain
- Derive Protocol —> Synthetix Generalised Derivatives
- Derive Exchange —> Synthetix Exchange
This platform gives Synthetix immediate access to a highly performant exchange with the following features:
- Options, perps and spot trading with existing markets/liquidity
- Multi-asset collateral, collateralise trades with any ERC20 (sUSDe, weETH, LBTC)
- Built-in USDC lending
- Smart contract accounts with session keys
- Modular, upgradable protocol
- Subaccounts, multiple trading accounts in 1 wallet
In addition, Derive has built a valuable liquidity network around the protocol:
- 11 active market makers across options and perpetuals
- Self-sustaining incentive program with detailed scoring based on market quality and volume
- Minimal integration time/barrier for market makers (critical to fast launch)
Leverage Technology to build L1 Exchange
The vision of Synthetix is Perps V4, which includes launching a centralized limit order book (CLOB) derivatives exchange on Ethereum Mainnet. The hybrid architecture that Derive has pioneered can be repurposed to enable a much shorter time to launch.
Treasury
As part of the acquisition, Synthetix will acquire Derive’s treasury, which consists of approximately $5.4m at the time of writing. Assets owned by the Lyra Foundation will also be transferred (pending foundation approval). Below is a breakdown of assets owned by the foundation and different DAO accounts. Only items >5k are included in the list to reduce length:
| Foundation | Number | Value |
|---|---|---|
| OP | 603,055.70 | $457,417.75 |
| On Loan | 100,000.00 | $100,000.00 |
| Celestia | 30,000.00 | $83,400.00 |
| USDe | 100,000.00 | $100,000.00 |
| USDC | 42,954.02 | $42,954.02 |
| Rain Collateral | 114,353.26 | $114,353.26 |
| DAO | ||
| Arbitrum | Number | Value |
| USDC | 9,108.42 | $9,108.42 |
| WETH | 24.52 | $62,783.56 |
| ETH | 6.98 | $17,875.83 |
| GMX/esGMX | 6,262.00 | $88,795.16 |
| xGRAIL (some vesting) | 200.00 | $74,628.00 |
| Mainnet | Number | Value |
| USDC | 25,679.21 | $25,679.21 |
| Aave | 116.26 | $26,262.45 |
| Base | Number | Value |
| AERO (locked) | 115,305.70 | $78,926.75 |
| WETH | 6.86 | $17,553.70 |
| Optimism | Number | Value |
| USDC | 76,982.43 | $76,982.43 |
| WETH | 15.96 | $40,877.80 |
| OP | 872,793.29 | $662,013.71 |
| Derive | Number | Value |
| OP | 110,249.00 | $83,623.87 |
| Misc liquid tokens | 30,000.00 | $30,000.00 |
| Other | Number | Value |
| Security Module | 2,465,562.00 | $2,465,562.00 |
| Velo NFT (OP) - 4yr lock | 11,300,000.00 | $735,630.00 |
| Total | $5,394,427.91 |
Transition
- Migration Contract: A contract will burn DRV tokens upon issuance of escrowed SNX.
- Incentives: Current incentive programs will continue until this proposal is approved.
- Governance Transition: Derive’s DAO will dissolve; the Synthetix Spartan Council will assume governance.
- DRV holders receiving SNX can vote in Synthetix governance.
- Product Rebrand:
- Derive’s frontend, contracts, and documentation will be rebranded as part of Synthetix.
- Treasury Transfer: All assets in Derive’s treasury wallets will be transferred to Synthetix’s Treasury Council.
- Approval Process:
- Derive DAO: Majority vote by stDRV holders via this DIP.
- Synthetix: Majority vote via a corresponding SIP.
Rationale
Test Cases
N/A
Configurable Parameters
N/A
Copyright Waiver
Copyright and related rights waived via CC0.
