TL;DR
- Synthetix has proposed acquiring Kwenta, an exchange derived from its ecosystem, to unify operations and enhance services.
- The acquisition values each KWENTA token at 17 SNX, with a token swap valued at $13.2 million.
- The integration would involve dissolving Kwenta’s governance and merging it with SNX’s Spartan Council.
Synthetix, the decentralized finance (DeFi) protocol specializing in derivatives, has announced plans to acquire Kwenta, an exchange that separated from its ecosystem in 2020.
The acquisition proposal was published on October 29 in the governance forums of both organizations, and if approved, it would result in the full integration of Kwenta into the platform. This would allow Kwenta to operate under the name Synthetix Exchange, merging both platforms’ operations into a single entity.
Proposals for an acquisition of @Kwenta_io by @synthetix_io have been published to both DAOs.
Should they be accepted, Synthetix will acquire Kwenta, our leading DEX by volume.
Learn more on our blog ⬇️https://t.co/G2aLqdTiFo pic.twitter.com/tLPJFHKT8w
— Synthetix ⚔️ (@synthetix_io) October 29, 2024
The proposed deal involves purchasing the entire circulating supply of Kwenta, totaling 532,375 KWENTA tokens, in exchange for 9.05 million new SNX tokens, which would be issued specifically for this purpose.
How the Agreement Will Be Implemented
This token swap, valued at approximately $13.2 million, would result in an inflation of the SNX supply by 2.8%. Additionally, each KWENTA token would be exchanged for 17 SNX tokens, representing a 19% discount compared to the 30-day average between both cryptocurrencies.
This valuation difference is justified by the disparity in trading volumes: while SNX reports a daily trading volume of $20 million on major centralized exchanges, Kwenta barely reaches $100,000, which reduces its liquidity and limits selling opportunities for its holders.
One of the most significant operational changes will be the integration of Kwenta’s treasury into that of SNX, as well as the dissolution of Kwenta’s governance structure, which will transfer control to SNX’s Governance Council, known as the Spartan Council.
Synthetix Recognizes its Mistake
For KWENTA token holders, the acquisition offers the option to exchange their assets for SNX contracts via a token migration contract, which will include a three-month lock-up period followed by a nine-month linear vesting schedule. This migration aims to provide greater liquidity to KWENTA holders, who have so far encountered limitations in converting their assets without incurring significant losses.
The protocol has noted that Kwenta’s separation in 2020 was a strategic mistake, as it distanced the protocol from its user base and created an unsustainable economic model for front-ends. With the integration, SNX aims to regain direct contact with its users, allowing it to improve its perpetual trading engine and develop more competitive and sophisticated derivative products
