On March 10, 2022, synthetic assets ('synths') were launched on Thorchain.

Initially, Thorchain kept a low cap of synths allowed in pools. After the mechanism proved secure, the caps were raised to about %16.5 of pool depth consisting of synths.

Benefits of Synths

In the following chart, I show the percentage of the depth of pools consisting of synthetic assets.

To make the chart more visually appealing, I only show pools with a share of synths above 4%.

Synths in Liquidity Pools Over Time

• The share of synths in pools has increased since the caps were raised.
• The Dai-Rune pool often has a large share of its depth consisting of synthetic assets.
• Ethereum pools make the most use of synthetic assets. This is not surprising, considering that synthetic assets allow trading at lower fees compared to native asset swaps.

It is well known that swap volumes on Thorchain have rapidly increased since the introduction of synths. These types of assets can be traded faster and at lower fees compared to native assets.

Increased swap volumes generate higher fees to liquidity providers. Thanks to these increased swap volumes, providing liquidity on Thorchain currently offers attractive yields.

In addition, previous research has shown that the price of RUNE is correlated with swap volumes on Thorchain.

Synthetic assets are an impressive innovation that benefit all Thorchain stakeholders. The utilization of Synths has grown over time, and there is still room for some pools to use them even more.