Synthetix Founder Warns SNX Stakeholders: Use the Carrot or Face the Whip!

The founder of Synthetix, Kain Warwick, has committed to increasing pressure on SNX token holders in order to compel them to engage with the new staking mechanism aimed at restoring the peg of the sUSD stablecoin.

At the end of March, the «stablecoin» lost its parity with the US dollar. On April 18, the value of sUSD plummeted to a local low of $0.68. At the time of writing, the price has rebounded to $0.77 (CoinGecko).

The collateral for issuing the «synthetic stablecoin» consists of SNX tokens locked in staking.

Synthetix has attributed the current volatility of sUSD to the implementation of SIP-420, which transferred debt risks from stakers to the protocol itself.

On April 18, the project team launched the 420 Pool solution. This mechanism allows users to lock up sUSD for a year in exchange for rewards in SNX.

Warwick acknowledged that the user interface of the mechanism is currently «very manual.» He anticipates improvements from developers within a few days. Following that, the Synthetix founder plans to evaluate the de-pegging dynamics of sUSD, and if the stablecoin does not return to its dollar parity, he intends to apply more pressure on pool users.

«This is entirely solvable, and it’s the responsibility of SNX stakers. We haven’t tried anything that hasn’t worked, and we’ve now tested the incentive; it seems to have had some effect, but I’ll reserve judgment. I believe everyone knows how much I favor a firm approach, so if you’re hoping to get by on just incentives, I’ve got bad news for you,» stated Warwick.

He emphasized that the net worth of SNX in staking amounts to «several billion,» indicating that «there’s capital available to resolve the issue»; it just requires adjusting the incentives.

Regarding the 420 Pool, one commenter remarked:

«I just skimmed through the mechanics, so please feel free to teach me. However, tying a stablecoin to any token feels like a ‘trust me, bro’ economy. It will break down over a sufficiently long time frame.»

In their view, the proposed «extremely immature» solution for maintaining sUSD’s stability raises «concern and negativity.»

To recall, Standard Chartered projected the total capitalization of stablecoins to reach approximately $2 trillion by 2028.