Kwenta State Log

A living document defining the state of Kwenta

Kwenta State Log

Kwenta Improvement Proposals

KIP-138: Synthetix Acquisition Proposal

Simple Summary

Synthetix is proposing to acquire Kwenta in a token<>token transaction. The terms of the transaction are as follows:

  • 1 KWENTA <> 17 SNX
  • This is an implied valuation of $13.2m based on a circulating supply of 532,375.
  • SNX received in the conversion are subject to a 3 month lock and 9 month linear vest following the lock period.

The proposed transaction price is at a 19% discount to the 30 day average KWENTA/SNX ratio. This reflects the relative liquidity of the SNX and KWENTA tokens. Synthetix frequently trades over $20m per day on leading exchanges such as Binance, OKX and Coinbase. Kwenta generally trades $100k per day.

Abstract

This proposal will hand ownership of Kwenta and everything Kwenta related to Synthetix.

Motivation

In 2020, Kwenta was born out of Synthetix, to be the front end to the deep liquidity that Synthetix could provide. This was done to prioritise the development of a high-quality decentralized frontend for Synthetix, with a distinct set of contributors dedicated exclusively to this effort. Historically, the focus on the frontend had been divided between staking and trading, and further fragmented across infrastructure and interface teams. As a result, the trading interface was consistently underfunded and deprioritized compared to other initiatives.

However, as Synthetix and Kwenta drifted apart, various unintended consequences and conflicts arose, primarily Kwenta’s ability to generate a sustainable business model in the mid-long term. This has resulted in the token losing significant value through the recent and prolonged bear market.

This transaction will provide Kwenta and KWENTA token holders with the following benefits:

  • Low $KWENTA Liquidity
    • realistically, it is difficult for tokenholders to access the value for their assets given the low liquidity of KWENTA. SNX is a significantly more liquid asset that will give holders the opportunity to exit near par value across significantly more trading venues such as Binance and Coinbase.
  • Kwenta’s runway continues to shorten
    • Whilst recent improvements have been made to the revenue stream of Kwenta, runway continues to be a primary concern. This is a beneficial transaction in that all of the hard work that has gone into building Kwenta will live on (under the Synthetix brand) and KWENTA holders get an exit or realignment with Synthetix.
  • Become Spartans
    • Synthetix is an OG DeFi protocol that is currently undergoing a reboot to reimagine itself. Under new leadership, Synthetix has recently streamlined governance and operations and is executing on an ambitious and exciting 2025 vision.
  • Maintain ecosystem exposure whilst vesting
    • Kwenta holders would not be sitting in a fixed cash position for the duration of the token lock/vest. They’d still maintain upside potential by holding SNX throughout the period.

Specification

This acquisition is for everything related to Kwenta, including but not limited to all smart contracts, all repos, all IP, all operations, everything in its treasury and treasury related wallets.

Upon approval, a new transaction contract will be created to allow KWENTA holders to burn their KWENTA and in turn access a SNX vesting contract. The parameters of the transaction are as follows:

  • 1 KWENTA <> 17 SNX - this represents a valuation of $13.2m ($1.456 SNX and 532k KWENTA in circulating supply).
  • SNX received in the conversion are subject to a 3 month lock and 9 month linear vest following the lock period.
  • Circulating supply is defined as any tokens outside of the possession of the KWENTA treasury.

The proposed transaction price is at a 19% discount to the 30 day average KWENTA/SNX ratio ($30.64/$1.456). This reflects the relative liquidity of the SNX and KWENTA tokens. Synthetix frequently trades over $20m per day on leading exchanges such as Binance, OKX and Coinbase. Kwenta generally trades $100k per day.

Tokenomics Handover

To prepare for the conversion of KWENTA tokens to SNX a few changes need to be made to tokenomics at the passing of this proposal:

  • Inflation will be stopped, and the final total supply number can be determined. (From this final circulating supply can be derived)
  • USDC fee distribution back to stakers will cease.
  • Early vest fees will be set to 0 releasing all escrowed Kwenta as liquid.
  • The early vest fee when claiming staked rewards will be set to 0 releasing all unclaimed rewards as liquid.
  • The treasury is to burn its share of KWENTA tokens as this is outside circulating supply.
  • A contract is to be developed jointly by Synthetix/Kwenta to faciliate conversion of liquid KWENTA into vesting SNX as per terms above.

Governance

The Kwenta subdao will be dissolved if the governance proposals pass in both communities. At this stage, governance will be transitioned over to the Spartan Council.

The Kwenta 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 Kwenta Council need to reach a majority, but the sister proposal, SIP-411, will need to reach a majority within the Spartan Council as well.