Hot on the heels of acquiring Kwenta, Synthetix has made another major strategic acquisition, this time acquiring a leading leveraged token platform, TLX. The acquisition was a token-for-token transaction that was approved via SIP-412 and TIP-14.
Adding leveraged tokens is the first step towards Synthetix building and offering a wide range of vault products. This is the second core stage in Synthetix’s new strategy, focused not only on designing a decentralized liquidity layer but also on being a primary product issuer on top of it.
What to expect next
Synthetix is now undergoing a review and audit of all TLX products. In partnership with the TLX team, we’re working on optimizing several of the parameters in the current implementation and sprinting towards launching on Base.
We plan to complete a comprehensive review, implement parameter improvements, and redeploy all contracts in the coming weeks.
Once done, we will announce a juicy leveraged token incentive program to kick off 2025.
The acquisition of TLX will mark the first end-customer, revenue-generating product built on top of Synthetix that will be owned and operated by Synthetix. This marks a significant milestone in Synthetix’s commitment to expand its product offering and generate additional value for SNX tokenholders.
The acquisition of TLX means we can go to market with a leveraged token with 6 months of history and performance in 2024. Some of the additional benefits this transaction provides the Synthetix community include:
- Codebase foundation – Using the TLX codebase as a foundation for Synthetix’s leveraged tokens will help with time to market. This will help Synthetix speed to market and provide a solid ground on which to design an improved v2 leveraged token system.
- Additional growth opportunities – The addition of a suite of leveraged tokens to the Synthetix product stack can result in additional avenues to grow the brand, protocol revenues, and our product offerings.
- Enhanced branding and market positioning – Consumers associate better with B2C brands. Synthetix’s leveraged tokens will help improve market awareness of the protocol and provide valuable touch points with the crypto community. This will help onboard more individuals to the Synthetix ecosystem
- Merging of communities – TLX has a passionate and highly engaged community that overlaps significantly with Synthetix’s. Bringing these communities together and creating a cohesive, unified, passionate army of Spartans will strengthen our presence and brand.
- One token – Burning TLX for SNX will remove fragmentation and potential confusion caused by the presence of two assets. Having one token can result in more reflexive performance and attract more liquidity to Synthetix (e.g., $2m of new capital into one asset creates more value than $2m across two different assets).
What are leveraged tokens?
Leveraged tokens are the tokenized form of a levered strategy, multiplying the results of the price movement of an underlying asset like ETH or BTC. So, an ‘ETH3x’ long token is designed to go up and down three times as fast as ETH. Leveraged tokens offer a more convenient way to access leverage on assets without trading on perpetual futures platforms and managing margin requirements. Traders can mint their leveraged token, transfer it, and redeem it at any time.
Structured products that give levered exposure to a base asset are not a new innovation and have been a part of the traditional finance stack for decades, attracting tens of billions of dollars in value.
As we’ve seen firsthand in the last two weeks, the TLX community is passionate, fierce, and hungry to support their protocol. We’re excited to have this community coming to Synthetix as we continue to deliver the best decentralized leveraged tokens for the broader crypto community.
We hope you all feel welcome and enjoy Spartan energy over the coming months. Over the coming weeks, the transaction contract will be created to allow you to send your TLX to be burned in return for SNX. The primary attributes of the contract are as follows:
- 18 TLX will convert to 1 SNX
- There will be a 1-month lock, followed by a 4-month linear vesting period.
- Holders can redeem the portion of their SNX that has vested anytime during the 4-month vest.
- Neither TLX nor Synthetix Treasuries will be converting their TLX tokens, instead they will be burning them.
- The lock period for all TLX holders started on December 5th, 2024, no matter when TLX tokens are sent to the contract.
- After 2 years, any TLX not sent to the contract will be deemed lost and will not convert into SNX.
After the 5-month lock/vest concludes, 700k sUSD will be distributed to the TLX community as follows:
- 4,635.77 sUSD will be ‘earnable’ per day (700k over 151 days) – this will be adjusted to reflect the number of days from the contract launch to the 5th of May (e.g., 4,761.90 sUSD each day for 147 days if it were today).
- Users will accrue their pro-rata share based on the number of TLX/SNX held in the transaction contract on each day.
- Users that withdraw a portion of their SNX from the contract will still accrue earnable sUSD, but their pro-rata share of earnable sUSD will reduce (assuming no one else withdrew).
- All sUSD earned will be distributed within a week of the final vesting day (i.e., before May 12th).
Final thoughts
The strategic acquisition of TLX marks another significant milestone in Synthetix’s vision to own and operate products on top of our own liquidity layer.
Leveraged tokens are just the first category of structured products that Synthetix will be launching over the coming months. This suite of products will help broaden Synthetix’s capabilities and generate more value for SNX stakeholders over the long term.
