A censorship-resistant set of smart contracts living on the Ethereum blockchain democratising access to sophisticated investment strategies. The dHedge protocol unlocks the potential for every Web 3 user to invest like the best, without requiring permission or trust.
Return on investment.
Assets under management. As more investors contribute to a particular pool, the AUM of the pool increases.
A synthetic asset in the present context is an ERC-20 token representing the price of an underlying asset or a mixture of assets. sXAU will track the price of gold while sBTC tracks the price of silver. Synthetic assets enable exposure to the price of an asset without having to hold it.
A trader who wishes to go short Bitcoin can do so by holding iBTC. The price of iBTC increases $1 every time the price of sBTC decreases $1. Inverse synths have upper and lower limits. When a limit is reached, the inverse synth's price will freeze. Read more about inverse synths.
In the context of financial derivatives slippage refers to the difference in price a trader or bot attempts to enter or exit a trade and the actual price at which a trade is executed.
Due to limited market liquidity, slippage costs generally increase as the size of an order increases.
Slippage costs may not always be high just because the order size is large. In the absence of highly efficient market makers creating very deep order books, slippage impact retail managers trading smaller size. In times of amplified price volatility, such as a during flash crash, slippage can increase even more as a result of limited market liquidity.
While slippage can be seen as a cost of doing business, dHedge managers are able to eliminate this cost element by trading with zero-slippage, infinite-liquidity synthetic assets. These cost savings can ultimately be passed onto investors as higher returns.
Slippage can have a major impact on the trade performance and user experience. Consider the plight of one BitMEX trader:
For a long time BitMEX was the most liquid cryptocurrency derivatives exchange. According to data from Skew, a $5 million XBT order at BitMEX results in an average implied bid-offer spread of 0.14%. At other centralized derivatives venues, a $5 million order could produce average slippage as high as 1.44%.
The breakthrough with synthetic assets is that slippage is always 0.
Synthetic assets are given a price from a continuously updating decentralised oracle, namely Chainlink. To provide a price for sETH, Chainlink's decentralised oracles will send an update every few minutes of an aggregated price derived from a robust set of sources. The synthetic asset's price will track the market price of the base asset.
A decentralised stablecoin issued by SNX stakers. 1 sUSD is backed by several dollars worth of SNX collateral.
A stablecoin is a crypto asset that is pegged to $1 on the blockchain. The point of a stablecoin is that its value is pegged to an equivalent value of its real-world counterpart. Synthetix offers sAUD, sEUR and other fiat currencies in addition to sUSD.
Stablecoins facilitate arbitrage, making markets more efficient across different venues where crypto assets are traded. Another use for stablecoins is to reduce exposure to market volatility.