Synthetix takes on the counterparty risk with derivatives exchange Infinex

Synthetix decentralized financial protocol is preparing to expand its range of affiliate products.

Founder of Synthetix Fabric Warwick revealed intention to introduce a new derivatives front-end called Infinex to Synthetix’s decentralized trading infrastructure. The upcoming exchange will cater to novice and experienced traders alike by offering features similar to centralized exchanges (CEXs), such as a noncustodial central limit order book.

While Synthetix already operates Kwenta, a derivatives decentralized exchange (DEX) on Optimism, Warwick highlighted a major problem with the current platform. For example, traders are required to bridge assets to a layer-2 rollup and exchange them for sUSD, Synthetix’s stablecoin used as margin collateral, before they can start trading.

Adding to the inconvenience, any orders or cancellations on existing platforms require the signature of the merchant’s wallet, incurring a small fee. In a blog post, Warwick emphasized that his goal was to dispel the skepticism surrounding the ability of decentralized perpetual (Perps) to directly compete with centralized exchanges.

Being on a noncustodial decentralized exchange offers advantages, and Warwick jokingly mocks the now defunct FTX and other centralized exchanges in blog posts for their typical counterparty risk. Warwick highlights FTX’s dramatic collapse in 2022.

“It is becoming increasingly clear that Synthetix Perps’ growth barriers can be overcome, but this requires a new approach.”

The planned DEX will cater to traders familiar with platforms like Binance, offering access via a simple username and password, while maintaining a noncustodial setup. Warwick explained that Infinex will generate a unique public-private key pair for each user, stored locally in the browser, used only for signing trade orders and not for withdrawing funds.

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The specifics of the technical implementation of the DEX were not disclosed, with Warwick mentioning on Synthetix Discord ask me what sessions are entrusted to the core developer.

The introduction of this new project is expected to coincide with the release of Synthetix version three of its perpetual futures trading system, which is anticipated in the coming months.

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