Synthetix to Acquire Kwenta, Reversing 2020 Separation

Synthetix, the decentralized finance (DeFi) protocol specializing in derivatives, has announced plans to acquire Kwenta, an exchange that separated from its ecosystem in 2020.

Decentralized finance (DeFi) derivatives protocol Synthetix has proposed to acquire Kwenta, a decentralized exchange (DEX) that was spun off from the SNX ecosystem in 2020.

The acquisition proposal was posted on October 29 on the governance forums of both organizations. If approved, the deal would see Kwenta fully integrated back into the Synthetix platform.

The proposal outlines a plan for Synthetix to acquire the entire circulating supply of Kwenta, which amounts to 532,375 KWENTA tokens. In exchange, Synthetix would issue 9.05 million new SNX tokens specifically for this purpose.

The token swap would be valued at around $13.2 million and would result in a 2.8% inflation of the SNX supply. Each KWENTA token would be exchanged for 17 SNX tokens, a 19% discount compared to the 30-day average price between the two cryptocurrencies.

The difference in valuation is due to the disparity in trading volumes — SNX reports a daily trading volume of $20 million on major centralized exchanges, while Kwenta barely reaches $100,000, making it less liquid and offering fewer opportunities for its holders to sell their holdings.

Among the operational changes, Kwenta’s treasury would be integrated into SNX’s, and Kwenta’s governance structure would be dissolved, transferring control to SNX’s Governance Council, known as the Spartan Council.

For KWENTA token holders, the acquisition would offer them the возможность to exchange their assets for SNX contracts through a token migration contract. The migration would include a three-month lock-up period followed by a nine-month linear vesting schedule. The migration is intended to help provide greater liquidity to KWENTA holders, who have encountered difficulties attempting to convert their assets without taking substantial losses.

The protocol has acknowledged that Kwenta’s spinoff in 2020 was a strategic mistake that distanced the protocol from its user base and created an unsustainable economic model for front-ends. By reintegrating Kwenta, SNX aims to regain direct contact with its users, enabling it to improve its perpetual trading engine and develop more competitive and sophisticated derivative products.