DeFi can operate at speeds usually associated with centralized systems
DeFi protocol Synthetix is the number 1 DeFi dapp by users as ranked by DappRadar at the time of writing. The popular DeFi protocol has recently announced a collaboration with Optimism. They have launched a demo built on the Optimistic Virtual Machine (OVM). A virtual machine for the Optimistic Rollup, an Ethereum layer 2 scaling solution.
The demo has successfully shown that the layer 2 solution can reduce oracle update latency by 37.5x and exchange latency by 75x.
Optimism’s OVM is integrated with the same tooling and smart contract languages as those used on Ethereum. Thus allowing developers to deploy smart contracts on the layer 2 solution as they appear on layer 1.
The news is exciting for the DeFi space overall. Mainly as the Synthetix demo did not require any special code. Meaning it could be potentially deployed by other DeFi protocols.
According to Optimism, the Synthetix demo could achieve a 37.5x reduction in oracle update latency. Alongside an impressive 75x reduction in transaction delay. Compare that to the sluggish 15 second average transaction time on the Ethereum mainnet and the benefits become very real.
The demo also demonstrated how oracle-and exchange-related gas prices could be reduced by 27.2x and 143x, respectively. It will be interesting to see how the demo develops.
This feature will benefit Synthetix, as the OVM can transfer all the protocol’s smart contracts from layer 1 to layer 2 without requiring any significant changes. Synthetix will also be able to update its price oracle more often. No longer having to temporarily halt transactions as they do on layer 1 and provide a smoother service overall.
You can check out the Synthetix Exchange L2 demo live on OVM.
Competition & bug bounty
During this demo, Synthetix and Optimism will be running a trading competition on l2.synthetix.exchange, with 50,000 SNX in prizes.
This competition has been designed to encourage traditional traders to experience the OVM. Which will enable decentralized financial platforms to operate at speeds usually associated with centralized systems.
The awarding of competition prizes will be at the discretion of the Synthetix core contributors, specifically to exclude any traders who exploit a bug to increase their wallet balance. Anyone who discovers a bug relating to the Synthetix contracts during the demo will be eligible for a bug bounty if they report it responsibly.
For issues relating to the OVM, the Optimism team will award bug bounties if reported responsibly.
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