Synthetix scuttles $27M Derive deal after community concerns

Synthetix Abandons $27 Million Derive Acquisition Plan After Community Pushback

In a surprising turn of events, the decentralized finance (DeFi) platform Synthetix has decided to scrap its $27 million acquisition of the crypto options platform Derive. This decision comes after significant negative feedback from both the Synthetix and Derive communities. The deal, which involved a token exchange, faced criticism regarding its valuation and potential benefits. As reported , the acquisition proposal “did not resonate” with the communities, leading to a mutual agreement to withdraw.

Key Concerns Raised by the Community

• Token Exchange Rate: Many community members felt that the proposed exchange rate of 1 SNX token for 27 DRV tokens undervalued Derive’s platform.
• Token Lock-Up Period: The initial proposal included a three-month lock-up period for DRV tokens, which raised concerns among holders. Synthetix attempted to address this by removing the lock-up for holders with less than 1 million DRV.
• Deal’s Overall Benefit: Some community members questioned the strategic advantages of the acquisition, especially concerning potential token dilution.

Synthetix’s Response

Synthetix strategy lead Ben Celermajer acknowledged that the community’s response fell short of expectations. Despite some members finding the deal acceptable, Synthetix decided not to proceed with the acquisition, emphasizing their commitment to collaborative and constructive endeavors. Celermajer stated that Synthetix will continue to explore opportunities for building a decentralized derivatives platform on the Ethereum mainnet.

Derive Community’s Perspective

Members of the Derive community voiced their concerns on the project’s forum. User “Ramjo” criticized the token exchange rate, viewing it as “a poor reflection of the value of Derive as a platform.” Another user, “AlvaroHK,” argued that Derive generates more revenue than Synthetix, making the deal difficult to justify. AlvaroHK also highlighted concerns about potential token dilution due to Synthetix’s plans to increase its SNX supply.

Background of Derive

Derive was initially incubated by Synthetix in 2021 as Lyra, operating as a decentralized options protocol within the Synthetix ecosystem. Over time, it rebranded to Derive and took steps to operate independently, including moving away from Synthetix’s sUSD stablecoin and liquidity.

Conclusion

The decision by Synthetix to abandon the Derive acquisition highlights the importance of community feedback in the decentralized finance space. While the acquisition aimed to strengthen Synthetix’s position in the derivatives market, the concerns raised by both communities ultimately led to its termination. Synthetix will now focus on alternative strategies to develop its decentralized derivatives platform.