SIP-415: Acquire Derive to expand Synthetix’s derivative offering

Author	Fenway, coKaiynne
Status	Draft
Type	Governance
Network	Ethereum & Optimism
Implementor	TBD
Release	TBD

Simple Summary

This proposal outlines the strategic acquisition of Derive, the foremost decentralized options protocol in crypto.

The transaction is contingent upon the approval of SIP-415 by the Spartan Council and the corresponding DIP by the Derive token holders/delegates.

This acquisition underscores Synthetix’s commitment to enhancing its platform capabilities, diversifying revenue streams for SNX tokenholders, and solidifying its position as the leading decentralized derivatives protocol.

Abstract

This SIP seeks to acquire Derive through a token-for-token transaction structured as follows:

Exchange Ratio: 27 $DRV <> 1 $SNX, reflecting an approximate $27 million valuation.
Derive Circulating Supply: 790,993,522 $DRV (from Coingecko).
Vesting Terms: $SNX tokens received from the conversion of $DRV will be subject to a 3-month lock-up period, followed by a 9-month linear vesting schedule.
Valuation Basis: The transaction price is set at 8% discount to the spot $DRV/$SNX exchange ratio at the time of the proposal. This reflects the relative liquidity of both assets (SNX trades $25m per day, DRV trades <$100k per day).
Funding: To facilitate the acquisition, Synthetix will issue up to 29.3m new $SNX tokens.

This proposal aligns with Synthetix’s strategic objectives to expand its ecosystem and enhance value for stakeholders.

Motivation

Derive, formerly Lyra, emerged from Synthetix during a period when Synthetix strategically shifted its focus from product development to building a liquidity layer for integrators to leverage. This pivot led to principal-agent challenges due to misaligned incentives and token performance expectations, particularly with Derive.

Recognizing these issues, Synthetix deliberately returned to a product-focused approach late last year, recently validated by the successful acquisitions and integrations of Kwenta and TLX in late 2024, which enhanced Synthetix’s ability to drive and deliver product improvements.

Derive, as a former integrator, faced significant principal-agent tensions with Synthetix. In response, Derive distanced itself by discontinuing support for sUSD, moving away from Synthetix perpetual futures (initially to GMX), and ultimately launching its own perpetual futures product - a decision that was certainly the correct one for them.

As Synthetix prepares to launch the next version of our protocol, the existing Derive product, their team’s expertise and their passionate community, will provide significant value and ensure successful execution and delivery.

Synthetix’s Vision

Synthetix is pursuing an ambitious mission to reestablish itself as a leading decentralized finance (DeFi) protocol. Central to this vision is the development of Perps V4, which includes launching a centralized limit order book (CLOB) derivatives exchange on Ethereum Mainnet. The proposed acquisition of Derive is a pivotal step in this transformation, offering several significant strategic advantages.

Strategic benefits of the acquisition

Talent Acquisition: Derive’s team comprises highly skilled individuals who have been developing critical components relevant to Synthetix V4 over the past two years. Integrating this talent will address knowledge gaps, particularly in mitigating “unknown unknowns,” and strengthen the design and execution of V4, ensuring its success.
Proven Expertise and Reduced Delivery Risk: Derive has already built many of the components integral to V4. Leveraging and refining these existing designs will minimize the risk of scope creep and timeline delays, accelerating Synthetix’s development roadmap with greater confidence.
Product Portfolio Expansion: The acquisition will enable Synthetix’s derivatives exchange to offer both perpetual futures and options markets, creating a more comprehensive and competitive product suite.
Enhanced Branding and Market Positioning: Leading centralized exchanges (CEXs) in the derivatives space offer both perpetual futures and options. By incorporating options, Synthetix will differentiate itself in the decentralized derivatives market, strengthening its position as the premier decentralized derivatives protocol.
Community Unification: Derive’s passionate community shares significant overlap with Synthetix’s, rooted in a longstanding relationship. Merging these communities will create a unified, energized group championing decentralized derivatives, amplifying Synthetix’s market presence and stakeholder engagement.

The proposed acquisition of Derive is designed to deliver significant value to Synthetix tokenholders through the following key benefits:

Value for Synthetix

One token: Consolidating the SNX and DRV tokens and their respective communities will enhance market dynamics. A single token is expected to generate greater reflexive price appreciation, as capital inflows (e.g., $2 million invested in a unified asset) will have a more pronounced impact on market value compared to the same investment split across two separate tokens.
Accelerated Time to Market: Upon successful completion of the acquisition, Synthetix will deploy a centralized limit order book (CLOB) on Snaxchain within days, rather than weeks or months. This rapid deployment will enhance protocol cash flows in the near term, driving immediate financial benefits.
Growth and market differentiation: Integrating an options exchange into Synthetix’s product suite will strengthen brand awareness, differentiate the protocol in the competitive DeFi landscape, attract new users, and create additional opportunities for product and brand expansion.
Efficiency: The merger of Synthetix and Derive’s capabilities is expected to yield significant operational synergies, streamlining processes and optimizing resource utilization to enhance overall protocol efficiency.

Conclusion

The acquisition of Derive aligns with Synthetix’s strategic pivot to a product-focused protocol and supports its mission to lead the DeFi derivatives market. By integrating Derive’s talent, expertise, and product capabilities, Synthetix will accelerate the development of Perps V4, enhance its competitive positioning, and foster a stronger, unified community to drive long-term success. In addition, the proposed acquisition will create substantial value for Synthetix tokenholders by unifying the token ecosystem, accelerating market entry, driving growth through product differentiation, and improving operational efficiency.

These outcomes will strengthen Synthetix’s financial performance and competitive positioning in the decentralized derivatives market.

Specification

This acquisition encompasses the entirety of Derive’s assets and operations, including but not limited to all smart contracts, all on-chain and off-chain code, all repos, all IP, all domains, all front-end interfaces, all operational processes and all assets held in treasury and treasury related wallets.

Exchange Ratio: 27 $DRV <> 1 $SNX
Derive Circulating Supply: 790,993,522 $DRV.
Valuation: approximately $27 million.
Vesting Terms: $SNX tokens received from the conversion of $DRV will be subject to a 3-month lock-up period, followed by a 9-month linear vesting schedule.
Valuation Basis: The transaction price is set at 8% discount to the spot $DRV/$SNX exchange ratio at the time of the proposal. This reflects the relative liquidity of both assets (SNX trades $25m per day, DRV trades <$100k per day). The value reflects the benefits Synthetix would receive in relation to product expansion, the Derive CLOB architecture, an operational OP Superchain app-chain, and Treasury assets.
Funding: To facilitate the acquisition, Synthetix will issue up to 29.3m new $SNX tokens.

Funding the acquisition

To finance the acquisition of Derive, Synthetix proposes the following:

Token Issuance: Synthetix will mint up to 29.3m new SNX tokens to cover the acquisition cost.
Vesting Schedule: These tokens will be subject to a 3-month lock-up period, followed by a 9-month linear vesting schedule.
Token Inflation: The issuance represents an 8.6% inflation of the total SNX token supply over the subsequent 12 months.
Value Justification: The anticipated value from acquiring Derive’s centralized limit order book (CLOB) technology, operational app-chain, and options protocol is expected to significantly outweigh the impact of the token inflation.
Adjustment Clause: Subject to approval by both the Spartan Council and Derive tokenholders, the total number of SNX tokens issued may be adjusted following due diligence, with a maximum variation of 5% from the stated figure.

The decision to issue tokens was chosen over other financing options due to several advantages:

Liquidity for Derive token holders: DRV token holders face liquidity constraints, with limited ability to sell significant holdings without incurring substantial slippage. Issuing SNX tokens provides a liquid exit pathway, enhancing value for Derive tokenholders.
Alignment of interests: By issuing tokens, both existing and new SNX holders will have a vested interest in the future success of the combined protocol.
Community growth: Derive has a strong and passionate community of derivatives traders, particularly options traders. Bringing this community into Synthetix will enhance community engagement and advocacy for the protocol.
Capital preservation: This method allows Synthetix to preserve cash reserves for operational and future strategic needs.

Governance

Derive’s Governance forum, Agora, will be dissolved if the governance proposals pass in both communities. Governance will be transitioned over to the Spartan Council.

The Derive treasury will be absorbed into the Synthetix treasury. The Spartan Council will also become responsible for establishing operational efficiencies and allocating a new budget based on synergies created by the acquisition.

For this proposal to pass, not only will the Spartan Council need to reach a majority, but the sister proposal DIP, will need to reach a majority amongst DRV tokenholders and delegates.