Synthetix Debt Hedge Index

Synthetix Debt Hedge on Optimism (Symbol: dSNX): https://toros.finance/pool/0x59babc14dd73761e38e5bda171b2298dc14da92d The Debt Mirror Pool token is a tool that replicates the payoff of the Synthetix Debt Pool, or the Synthetix debt distribution here: https://stats.synthetix.io/ - enabling users to hedge their Active Debt exposure. 1 sUSD worth of dSNX pool tokens hedges 1 USD worth of active debt.

All Synthetix currency positions (sUSD, sEUR, sJPY, etc.) are combined and mirrored into a single position of USDC. Currently, the pool holds WETH for sETH, WBTC for sBTC and LINK for sLINK. Positions with less than 1% weights are not considered. dUSD is a stable coin yield pool. The dUSD token will appreciate in price via LP fees and harvesting the rewards (ATM BAL). The performance mining rewards are extra on top of that which currently include DHT, MATIC, and 1inch.

At a fixed time interval, a bot checks the SNX debt distribution and calculates new target allocations. It does this by reading the total supply from different Synthetix assets, calculating the USD value and percentage of the total supply of all assets, and establishing new weights. ETH locked in the EtherWrapper contract are deducted from the sETH supply, which currently results in a net short position of sETH. Currently, the pool holds USDC and WBTC as deposits on Aave, LINK as a normal asset position, and WETH as a debt position on Aave.

The bot calculates the percentages of current long/short positions, taking into account the deposited/borrowed assets on Aave and assets outside of Aave (current allocation). The bot compares current and target allocation and rebalances if the difference exceeds a defined threshold (currently set to 2%).

Rebalancing of asset outside of Aave (e.g. LINK):

• Decrease allocation:

  • Trade asset into USDC on 1Inch

  • Deposit USDC into Aave

• Increase allocation:

  • Withdraw USDC from Aave

  • Trade USDC into asset on 1Inch

Rebalancing of deposit asset (e.g. WBTC):

• Decrease allocation:

  • Withdraw asset from Aave

  • Trade asset into USDC on 1Inch

  • Deposit USDC into Aave

• Increase allocation:

  • Withdraw USDC from Aave

  • Trade USDC into asset on 1Inch

  • Deposit asset into Aave

Rebalancing of borrowed (short) asset (e.g. WETH):

• Decrease allocation:

  • Withdraw USDC from Aave

  • Trade USDC into asset on 1Inch

  • Repay borrowed asset on Aave

• Increase allocation:

  • Borrow more of the asset on Aave

  • Trade asset into USDC

  • Deposit USDC into Aave