SIP 119: Add ZEC crypto Synth Source

AuthorMaximilian Roszko
Discussions-Tohttps://research.synthetix.io/t/sip-add-zec-crypto-synth/313
StatusApproved
Created2021-02-13

Simple Summary

Add a new long synth for Zcash (ZEC).

Abstract

Zcash has on average a billion dollars worth of trading volume per day, all of that on centralized exchanges. Synthetix can capture a sizeable share of that market by creating a ZEC synth and pooling that with renZEC in a Curve pool, enabling Curve cross-pool swaps. If sZEC is created in the future, a proposal to the Curve DAO to create a ZEC pool with sZEC will be made. Similarly to how native BTC can be deposited to Curve using Ren, ZEC could also natively be deposited to Curve, into a sZEC pool to then be tradable against BTC/USD/ETH using the synth cross-pool swaps.

Motivation

Adding a ZEC synth could bring further further volume to the Synthetix protocol, and allow Zcash to enter the decentralized exchange market.

Specification

Overview

The Synth will be implemented in the same way as other crypto Synths.

Rationale

The rationale for proposing ZEC above other assets is specifically because there exists a permissionless bridge by the Ren project from Zcash to Ethereum, allowing anyone anytime to wrap ZEC into renZEC 1:1, and allow anyone to redeem renZEC to native ZEC 1:1. Given that Curve has integrated the Ren bridge for BTC, the same can be done for ZEC, allowing anyone to go from native ZEC into a ZEC pool on Curve. And using the cross-pool synthswap, anyone could then go from native ZEC to BTC/ETH/USD low-slippage through Synthetix+Curve, which could turn into a substantial amount of volume for Synthetix, and provide an attractive service for crypto users.

Liquidity Analysis

The tables below showcase statistics on the cost of pushing the price of ZEC on binance (on the ZECUSDT pair) by the percentage mentioned in the header (denoted in bp):

Pump 25 bp 50 bp 75 bp 100 bp 150 bp 200 bp 400 bp 600 bp 800 bp 1000 bp
mean $196,795 $275,645 $354,349 $410,621 $546,730 $616,651 $945,025 $1,219,954 $1,567,042 $1,853,732
median $195,851 $244,906 $336,222 $374,021 $541,698 $607,510 $992,823 $1,340,671 $1,549,769 $1,806,428
std $61,559 $110,256 $114,600 $87,147 $86,162 $67,796 $192,825 $213,906 $308,601 $248,518
Dump 25 bp 50 bp 75 bp 100 bp 150 bp 200 bp 400 bp 600 bp 800 bp 1000 bp
mean $132,994 $194,702 $316,287 $410,214 $503,143 $554,849 $699,116 $791,063 $904,981 $972,623
median $141,058 $190,115 $323,409 $434,571 $508,997 $544,489 $678,181 $766,982 $895,910 $953,081
std $19,250 $30,795 $71,641 $65,961 $27,555 $24,443 $88,667 $84,747 $62,588 $70,198

Bad actors in the space would need a signficant amount of capital in order to have a substantial impact on the price, therefore from a liquidity standpoint, ZEC appears to maintain reasonable amounts of liquidity on CEX. In addition, the average bid/ask spread is 2.9 bp which is extremely low compared to the benchmark of 5 bp on most alts with an average daily trading volume of USDT 50 million on the ZECUSDT binance pair alone.

Technical Specification

The Coinbase Oracle could be used as a price feed for ZEC, or the Zcash foundation, the ECC and or the Ren team could be lobbied to request a Chainlink price feed.

Test Cases

N/A

Configurable Values (Via SCCP)

N/A

Copyright and related rights waived via CC0.