The size of the Synthetix debt pool is constrained by the market capitalization of the SNX collateral. Other types of collateral meeting specific requirements around decentralization should be able to collateralize synths, thus diversifying the source of collateral backing the debt pool, engaging communities aligned with Synthetix, and relieving the supply limits. As a Synthetix ecosystem project incubated and funded by the synthetixDAO, Thales tokens will be well-positioned to serve as another source of collateral for the Synthetix debt pool.
This scenario is forward looking as Thales tokens are not live yet. I wanted to get community feedback and a temperature check anyway.
The motivation for additional collateral sources, like Thales tokens, is that the SNX debt pool needs ways to scale. The sUSD has traded above $1.00 and sometimes for months at a time. This premium suggests there is significantly more demand for sUSD than the SNX market capitalization can realistically support in the form of supply.
Two required properties of new assets collateralizing the debt pool would be:
1, the asset is reasonably decentralized in ownership.
2, the asset is uncensorable in transfers. While ERC-20 tokens are usually freely transferred, it’s logically possible for USDC or renBTC to be stopped from having free transfers due to potential regulatory capture of legal entities associated with these tokens.
35% of the Thales token supply will be owned by Synthetix stakers. Those stakers are also poised to be eligible for staking rewards on Thales, which makes up 25% of the Thales token supply. In total, at least 60% of the Thales token supply is dedicated to the primary purpose of being in the hands of not only the DeFi community at large, but also the SNX community in particular. From this information it is reasonable to conclude SNX stakers will own significantly more than a simple majority of the total Thales supply.
The Synthetix Council may be wary of adding additional collateral sources. The SNX token has a unique privilege in the Synthetix system of representing a pro-rata claim on the Synthetix fee pool. For non-SNX collateral, such as when a user mints sETH with ETH courtesy of the Ether Wrappr SIP, the owner of ETH position has no claim on the Synthetix fee pool. Other collateral, such as Thales tokens, would follow suit.
Positive impacts for the debt pool would be a reduced sUSD premium and more fees for SNX holders as more synths are floating around.
From the perspective of Thales token holders, participating in claiming fees from the Synthetix fee pool should not be necessary anyway. Capturing protocol fees generated by Thales usage, while generating liquidity against the market value of the Thales tokens, would likely be sufficient to attract most Thales stakers to mint synths. To address potential under-collateralization below the target level of collateralization for non-SNX collateral, an aggressive liquidation mechanism could be put in place to ensure the debt pool is not put at additional risk from a Thales token holder abandoning the collateralized position.
Additional collateral presents its own risk profile. The Synthetix Council may elect to add new collateral with different risk parameters than the parameters used for SNX. Thales tokens might start out with a 750% collateralization ratio to mint synths. Reaching sufficient liquidity on Thales tokens for the Council to be comfortable with liquidation and having a reliable oracle for the Thales/USD token price will also be required.