Synthetix Returning to Ethereum L1 With a Bold New Perp DEX
Synthetix – one of the oldest decentralized perpetual trading protocols in existence – just announced sweeping changes in the race to compete with exchange leader Hyperliquid.
In an interview with Bankless, Synthetix founder Kain Warwick dug into crypto’s “revenue meta craze,” explored the synergistic effects of token burns, and unveiled the next generation of Synthetix (set to launch in November).
Although Synthetix was an early adopter of Ethereum Layer 2s, first deploying to Optimism in 2021, Kain stated that this decision “looked like a good idea at the time, but didn’t work out.” While the move intended to combat high transaction fees and long wait times, it was impaired by lower amounts of crypto assets on L2s and fragmentation between different chains.
Over the past year, the Synthetix team acknowledged its L2 shortcomings and recognized the opportunity of re-deploying as the leading perpetual exchange on the Ethereum L1.
Such a deployment has long been considered impractical, as quality exchanges require sub-second responsiveness and Ethereum only produces blocks every 12 seconds, but Synthetix’s new architecture decouples offchain orders from onchain settlement.
Like a rollup that bundles multiple transactions and settles them together on Ethereum after a short delay, the new Synthetix batches offchain orders and settles them every Ethereum block, while keeping trader margin on L1 throughout the process.
This structure eliminates centralized chokepoints for operations besides order placing, providing centralized exchange-like confirmations with the benefits of Ethereum’s world-class security.
While this “optimistic orderbook” unfortunately makes early-stage traders reliant on the operator to behave correctly until settlement, Kain identifies an eventual path forward to trustlessness through the utilization of trusted execution environments (TEEs).
Should a steady iterative process find the best balance between fast order matching and secure settlement, Kain believes that “optimistic orderbooks” could become a reusable design primitive for any app that needs CEX-like responsiveness with mainnet custody and finality.
Catch the full episode with Synthetix founder Kain Warwick, available now on Bankless. 👇
