Synthetix's sUSD in Crisis: Founder Urges Stakers to Act or Face the Consequences

Kain Warwick's Bold Plea to Restore sUSD's $1 Peg

The heat is on for sUSD as it struggles to cling to its $1 peg, and Synthetix founder Kain Warwick isn't holding back. In a fiery call to action, he's demanding stakers step up and restore stability before the gloves come off and tougher measures are enforced.

This depeg drama has been dragging on for weeks, sparked by recent shake-ups in how sUSD is minted and backed. The team's already thrown a new liquidity lifeline, but it's not enough to pull sUSD back from the brink.

In a no-holds-barred thread on X dated April 21, Warwick didn't mince words. He's calling on SNX stakers to dive into the new staking mechanism, warning that the current soft-touch approach might soon be swapped out for some hard-hitting enforcement.

Enter the 420 Pool, the latest play to save sUSD. It's offering SNX holders a slice of 5 million SNX tokens if they lock their sUSD for a year. Warwick's betting big that this long-term lockup will soak up the excess supply and ease the selling frenzy that's been tearing sUSD away from its peg.

Warwick's not sugarcoating it - the current process, where you send sUSD straight to a contract, is a hot mess. But he's hopeful that once the user interface launches in the next few days, stakers will jump in and make a difference. If they don't? Well, the protocol might just switch from dangling carrots to swinging sticks.

"We tried nothing which didn't work, now we've tried the carrot and it kind of worked but I'm reserving judgement. I think we all know how much I like the stick so if you think you will get away with not eating the carrot I've got some bad news for you," Warwick declared.

sUSD, the algorithmic stablecoin from Synthetix, is backed by the platform's native SNX token. It's not your average fiat-backed stablecoin - it uses crypto collateral and Chainlink oracles to keep its peg, making it a wild ride when protocol changes hit.

The sUSD depeg can be traced back to the game-changing SIP-420 update. Aimed at boosting capital efficiency, it slashed the collateral ratio for minting sUSD and shifted to a shared, protocol-owned staking pool. But while it made minting easier, it also flooded the market faster than demand could keep up, sending liquidity into a tailspin and sUSD plummeting below $1. At the time of writing, it's trading at a dismal $0.7714, down 4.2% in the last 24 hours.

Warwick's convinced the answer lies in tapping into the existing wealth within the ecosystem.

"The collective net worth of SNX stakers is like multiple billions - the money to solve this is there, we just need to dial in the incentives. We will start slow and iterate but I'm confident we will resolve this and get back to building perps on L1," he added.

sUSD isn't the only stablecoin to face a peg crisis. In March 2023, Circle's USDC took a nosedive to $0.87 after revealing a $3.3 billion reserve hit from the Silicon Valley Bank collapse. And just recently, TUSD lost its peg to the U.S. dollar in January amid whispers of a delayed collateral audit.