Curve should have a new liquidity pool for sETH/ETH
Abstract:
sETH/ETH has been requested multiples times since the inception of Curve.fi. This CIP is the first step in formalising the implementation of the sETH/ETH.
Motivation:
This pool will allow a new composability, with very efficient swap between all assets in [sUSD] – [sBTC] – [sETH] pools using Curve.fi and Synthetic/Kwenta exchange. Increasing fees for both protocols.
Specification:
This pool could contain these two tokens: ETH/sETH
It’s only kinda related, but while on the topic of synthetix based assets - how can Curve best profit from their new volume initiative?
It seems like they have already ended sbtc incentives and cut susd incentives to the point it is practically nothing. They need volume - so i can appreciate them trying to align their incentives with that requirement - just wondering out loud how/if this program might fit with CRV?
Another thing to consider might be supply of sETH - there is only around 18M in existence currently which might mean it would be in very short supply and trading fees on synthetix are so high I’m not sure many would arb it. Yeth vault proved there are a lot of people out there that would like to safely earn a yield on their ETH - just want to make sure we don’t shoot ourselves in the foot like they did by jumping on something that can’t scale.
The people involved in the respective projects will surely be able to explain you better than me.
Curve.fi allows very low slippage swap between tokens in the same pool (e.g. DAI -> sUSD, and ETH -> ETH). But not for swap between pools.
Synthetix.io allows to swap synthetic tokens with 0 slippage, only platform fee. (e.g. sUSD -> sETH)
Someone who would like to make a swap with a very large amount, could take advantage of a DAI -> sUSD -> sETH -> ETH system with way lower slippage than current possibilities. (DAI-ETH may not be the best case for slippage )
This increases revenue for both paltforms by being able to offer very low splipage for very large swaps.
Yes, this is how i was envisioning it working. Today, if you go to the main curve.fi page, the Sell button disables itself if you pick a stable on one side and say sbtc on the other, but sometime soon it could do as you propose, and swap the stable if necessary to susd, then swap that to sbtc, seth, etc. using the method described in the writeup. The SNX incentive could be split between vecrv holders or some such.
I would agree about capital efficiency. According to https://dashboard.synthetix.io/ looks like there isn’t much volume to be had (maybe 5M a day on average across all synths) - although that might change - and I guess with pool weightings, trying it might not hurt much unless a crv whale wanted to make yield off their ETH stack and had the votes to give this pool weight it probably wouldn’t otherwise get.
I think more people might use synthetix if it was more uniswapesque rather than having to pay the gas to deposit in their exchange, then pay a hefty trading fee to avoid front running, plus more gas for each trade. The SNX incentive might make it worthwhile - we’d be doing them a favor for sure.
For sure merits a lot of thought and discussion before proceeding I think - and maybe even playing with the synthetix native swap stuff and/or chatting with them about their thoughts.
This seems like a clever use of the Synthetix system that doesn’t lock users into the synthetic asset exchange, but uses it as an intermediary to achieve low slippage.
I wonder if it would be in Curve’s interest to create an endpoint for all of those exchanges by having an sPool for literally every asset on Synthetix? You could go:
108000 USDC => 10.05683917 renBTC or in dollars using their calculations
107987.26 -> 107219.38 (-0.71% slippage)
Might not work for smaller trades, and might not work as well if the sbtc pool wasn’t always over supplied with renbtc, but for larger trades and arb opportunities, it’s an interesting what if.
Although its true that the large Synthetix gas costs could reduce arbitrage volume, some folks might still arb the ETH/sETH pool against other ETH/sETH pools (such as the Uniswap V1 and V2 pools), so I’m not too worried about volume.
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