DeFi Ethereum

DeFi Project Synthetix Demos L2 Ethereum Exchange Powered by Optimistic Rollups

On Tuesday, May 5th, the Synthetix and Optimism projects co-announced the launch of an L2 demo of Synthetix.Exchange.
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Optimism PBC unveiled the Optimistic Virtual Machine (OVM), a promising layer-two scaling technology for Ethereum powered by optimistic rollups (ORU), back in February.

Things are moving fast, then, as the OVM is now getting “battle testing” courtesy of top decentralized finance project Synthetix. The meld sets the stage for more DeFi projects following suit with their own efficiency-minded embraces in the months ahead.

For context, ORUs can bring about extremely scalable sidechains that can extend the capabilities of Ethereum’s mainnet massively. Accordingly, Optimisim’s OVM has been an early hit because its a layer-two, ORU-compatible virtual machine that can run inside of the “world computer,” the Ethereum Virtual Machine (EVM).

The future of smart contracts may have already arrived, as such. And the latest prime example of that future is a new, OVM-powered demo version of Synthetix’s non-custodial decentralized exchange, Synthetix.Exchange.

Ethereum’s Latest L2 Exchange Experiment

On Tuesday, May 5th, the Synthetix and Optimism projects co-announced the launch of an L2 demo of Synthetix.Exchange.

“This integration demonstrates the power of OVM to deliver high-speed Ethereum transactions to supercharge the Synthetix trading experience,” the Synthetix team said.

The collaboration is a high-profile test of the OVM’s mettle. Synthetix — a synthetic assets trading protocol — is presently the second-largest DeFi project per value locked within its smart contracts. The new L2 demo will, and already has, brought new eyes to what ORUs can help Ethereum projects achieve.

And what are the optimizations at hand? According to the Optimism team, the OVM can provide Synthetix and other DeFi projects with major advantages like “alleviating issues with high gas costs, slow transactions, and expensive oracle updates.”

Trading Competition Ensues

To celebrate and show-off what the new OVM-powered demo exchange can do, Synthetix launched a trading competition with a 1st-place prize of 15,000 SNX.

That top prize, worth more than $12,000 at current prices, will go to the most prolific trader of OVM-sUSD tokens between May 5th and May 19th. (Note: sUSD is Synthetix’s resident stablecoin.)

The 2nd- and 3rd-place traders will win 10,000 and 5,000 SNX respectively, whereas anyone else who places in the top 20 will win 1,200 SNX each.

“Our trading competition will demonstrate the improve trading experience through OVM. It will run for two weeks — to get started, anyone can request 100,000 OVM sUSD via Twitter,” Synthetix said.

The competition’s most high-profile entrant so far has been Ethereum creator Vitalik Buterin, who signaled his intent to join in on the campaign on Twitter in the hours after the Synthetix and Optimism announcement.

If Buterin’s in, then you best believe that the demo is interesting, promising, worth further consideration, and also indicative of further experiments to come.

Not Optimism’s First Rodeo

The new L2 Synthetix.Exchange demo isn’t the first OVM meld in the DEX arena. The first was Uniswap’s “Unipig” exchange last year though it had its immature limitations at the time, Optimism said:

“In October 2019, we created, the first end-to-end implementation of Optimistic Rollup in collaboration with Uniswap. Unipig proved what was possible, but it was not practical … It required a custom backend & even custom contracts. There was very little we were able to repurpose from the existing Uniswap codebase.”

Alas, that stopping point is where the new Synthetix.Exchange demo comes in. The novel initiative comes in courtesy of improved tech and understandings and is much more representative of the DeFi ecosystem that’s to come, Optimism said:

“This time we didn’t build a custom system for Synthetix — we built it for Ethereum … The next step is to combine the Optimistic Rollup backend built for Uniswap with the OVM node built for Synthetix, and realize the dream of a fully Ethereum compatible layer 2 protocol.”


William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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