Stakers, debt, and pooled counterparties

SyTON stakers incur a ‘debt’ when they mint Synths. This debt can increase or decrease independent of their original minted value, based on the exchange rates and supply of Synths within the network.

For example, if 100% of the Synths in the system were synthetic Bitcoin (syBTC), which halved in price, the debt in the system would halve, and each staker’s debt would also halve. This means in another scenario, where only half the Synths across the system were syBTC, and BTC doubled in price, the system’s total debt—and each staker’s debt—would increase by one quarter.

In this way, SyTON stakers act as a pooled counterparty to all Synth exchanges; stakers take on the risk of the overall debt in the system. They have the option of hedging this risk by taking positions external to the system. By incurring this risk and enabling trading on Syde, stakers earn a right to receive fees generated by the system.