V2 SNX Debt Mirror

Pool Name	SNX Debt Mirror Pool
Symbol	dSNX
Polygon dSNX token	0x65bb99e80a863e0e27ee6d09c794ed8c0be47186
Fee	No fee currently, but will have a 2% annual streaming fee in the future

Enabled Assets

• USDC (deposit)

• LINK

• WETH

• WBTC

• Aave Lend/Borrow

Debt Mirror Index

The Debt Mirror Pool token is a tool that replicates the payoff of the Synthetix Debt Pool, enabling users to hedge their Active Debt exposure. 1 sUSD worth of Debt Mirror pool token hedges 1 USD worth of active debt.

Strategy

This pool mirrors the Synthetix debt distribution: https://stats.synthetix.io/. All Synthetix currency positions (sUSD, sEUR, sJPY, etc.) are combined into one position and mirrored by a USDC position in the pool.

Currently, the pool holds WETH for sETH, WBTC for sBTC and LINK for sLINK. Positions with less than 1% are not considered.

Net short positions of the debt distribution like sETH mirrored through borrowing.

Specification

Every fixed time interval the bot checks the SNX debt distribution (target allocation): It reads the total supply from different Synthetix assets, calculates the USD value and percentage of the total supply of all assets. 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 calculate 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 always occurs between an asset and USDC.

There are three types of rebalancing:

• 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

The rebalancing of short assets could impact the allocation of the long assets, because it is converted into USDC (USDC allocation increases/decreases). As the other rebalancing jobs would correct that, the “Rebalancing of short assets” job should run first of the sequence.