On July 11, 2019, Synthetix posted an offer on its blog1. Hold sETH and ETH together in a Uniswap pool, and you would earn SNX, the Synthetix token. The trial would run four weeks. Synthetix paid out 5 percent of the weekly SNX staking rewards, about 72,000 tokens a week.
Kain Warwick founded Synthetix. On August 2, 2019, he wrote the proposal that made those payments permanent4. Compound started handing out its COMP token on June 15, 2020, eleven months after the first post9. By August 2020, Decrypt was calling the practice yield farming10.
The offer on July 11, 2019
Why pay people to trade a pair? The answer was the exit. Synthetix ran an exchange for Synths, tokens that track the price of other assets1. A trader who wanted out had to sell on Uniswap. There, the sUSD to ETH rate often sat 5 to 10 percent below fair value, the post said.
So the team picked a pair meant to trade one for one: sETH, its Synth for ether, against ETH itself1. A liquidity provider deposits both tokens in a Uniswap pool. Traders swap against that pool, and the provider earns a share of the fees. Synthetix doubted the fees alone would draw a deep pool.
Its rules were strict. Rewards followed each wallet's share of the pool's tokens at the end of a weekly fee period1. Any withdrawal before a fee period closed cost the provider that period's reward. A multisig wallet, one that needs several people to sign, sent the SNX by hand.
Those tokens were worth about $25,000 a week, the post said, as of its publication at 15:13 UTC on July 11, 20191. Synthetix closed with a pitch. “If you haven’t yet taken the time to learn how to provide liquidity on Uniswap you now have 72,000 reasons to learn!” the team wrote.
Both sides, in their own words
Does liquidity stay once the rewards stop?
“We are four weeks into the sETH pool staking trial and there is almost 3k ETH of liquidity in the Uniswap pool”
“Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul”
Almost 1,500 ether in seven days
Synthetix reported its first result on July 22, 2019. “In one week, almost 1500 ETH has been added to the pool and it is now the fifth largest Uniswap pool,” Synthetix wrote2. By August 7, over 3,000 ETH and sETH had gone into the pool3. The team ran the trial one extra week.
Warwick moved the reward into the protocol with that proposal, SIP-84. A SIP, or Synthetix Improvement Proposal, is how the project changes its own rules. SIP-8 sent 5 percent of new SNX supply to the pool's providers. “We are four weeks into the sETH pool staking trial and there is almost 3k ETH of liquidity in the Uniswap pool,” Warwick wrote.
From a spreadsheet to a contract
Paying by hand broke down fast. On November 4, 2019, Clinton Ennis and Anton Bukov filed SIP-31 to replace it5. “There are weekly issues with valid LP's not getting rewards and cheaters getting rewards that should be disqualified,” they wrote. Each week took four multisig transactions and five signers.
Their fix was a staking contract. Providers would lock their Uniswap pool tokens in it and claim SNX at any time56. The proposed code was a GitHub project called Unipool. Synthetix switched to it with its Achernar release in February 2020, after an audit by Sigma Prime.
What the coverage missed
By The CryptoLately.com Desk's arithmetic, the wider market doubled from a small base over the next eleven months12. DefiLlama put all DeFi deposits at $0.55 billion on July 11, 2019. On June 15, 2020, the day COMP payouts began, the figure was $1.12 billion.
Then Compound's own deposits jumped. Compound held $93.37 million on June 15, 2020, and $605.77 million on June 30, 202014. The Block covered the launch that evening. Celia Wan reported that around 2,880 COMP would go out each day across eight lending markets9.
By late summer, coverage had moved on to newer tokens. Decrypt's August 31, 2020 story named yEarn's YFI, Compound's COMP and Aave's LEND as its prime examples of yield farming10. Synthetix, which had paid for liquidity since July 2019, went unnamed there.
A cost inside Synthetix surfaced in a newsletter. SNX stakers carry the debt behind every Synth, so heavy sETH holdings tilted their risk toward ether7. The Govern This newsletter traced it on May 2, 2020. “More significantly, the Archenar upgrade promised to address an unforeseen consequence of the sETH/ETH incentive pool: a debt pool that is heavily long ETH,” it said.
The summer the money arrived
DefiLlama's month-end count shows the turn. DeFi held $0.41 billion at the end of July 201912. At the end of June 2020, it held $1.87 billion. On December 31, 2020, it held $15.14 billion. By December 2021, the total reached $163.26 billion.
DeFi deposits rose from $0.41 billion in July 2019 to $163.26 billion in December 2021
Total value locked in DeFi on the last day of each month, all chains, in billions of US dollars
- July 2019 (SNX rewards) and June 2020 (COMP)
- Other months, 2019 to 2021
- Height: Deposits, $ billions
Source: DefiLlama [12].
Read the chart as a table
| Item | Value |
|---|---|
| Jan 2019 | $0.22B |
| Feb 2019 | $0.32B |
| Mar 2019 | $0.34B |
| Apr 2019 | $0.35B |
| May 2019 | $0.51B |
| Jun 2019 | $0.54B |
| Jul 2019 | $0.41B |
| Aug 2019 | $0.42B |
| Sep 2019 | $0.45B |
| Oct 2019 | $0.58B |
| Nov 2019 | $0.62B |
| Dec 2019 | $0.61B |
| Jan 2020 | $0.78B |
| Feb 2020 | $0.81B |
| Mar 2020 | $0.53B |
| Apr 2020 | $0.77B |
| May 2020 | $1.11B |
| Jun 2020 | $1.87B |
| Jul 2020 | $3.63B |
| Aug 2020 | $8.23B |
| Sep 2020 | $10.26B |
| Oct 2020 | $9.71B |
| Nov 2020 | $12.38B |
| Dec 2020 | $15.14B |
| Jan 2021 | $27.13B |
| Feb 2021 | $40.29B |
| Mar 2021 | $58.56B |
| Apr 2021 | $99.70B |
| May 2021 | $82.61B |
| Jun 2021 | $81.40B |
| Jul 2021 | $94.42B |
| Aug 2021 | $118.10B |
| Sep 2021 | $117.94B |
| Oct 2021 | $154.28B |
| Nov 2021 | $173.83B |
| Dec 2021 | $163.26B |
Three protocols show where the money went. At the end of 2019, Synthetix held $178.44 million and Compound $80.41 million1314. Uniswap held $27.37 million15. By December 2021, Compound held $9,071.74 million and Uniswap $8,399.90 million. Synthetix held $1,333.14 million.
Compound's deposits: $80.41 million in December 2019, $9,071.74 million in December 2021
Total value locked in Synthetix, Compound and Uniswap at each quarter's end, in millions of dollars
- Synthetix
- Compound
- Uniswap
- Height: Deposits, $ millions
Sources: DefiLlama [13]; DefiLlama [14]; DefiLlama [15].
Read the chart as a table
| Item | Synthetix | Compound | Uniswap |
|---|---|---|---|
| Sep 2019 | $57M | $105M | $19M |
| Dec 2019 | $178M | $80M | $27M |
| Mar 2020 | $88M | $86M | $36M |
| Jun 2020 | $269M | $606M | $72M |
| Sep 2020 | $700M | $829M | $2,333M |
| Dec 2020 | $1,245M | $1,977M | $2,166M |
| Mar 2021 | $1,980M | $7,715M | $5,783M |
| Jun 2021 | $1,249M | $6,159M | $6,012M |
| Sep 2021 | $1,773M | $9,732M | $6,491M |
| Dec 2021 | $1,333M | $9,072M | $8,400M |
The case for paying for liquidity
Warwick argued that a lasting reward would keep providers in place. “By formalising this mechanism at the protocol level, liquidity providers should have even more incentive to participate as they can be confident that this incentive will exist long term so the effort of establishing liquidiity will be worthwhile,” Kain Warwick wrote in SIP-84.
Synthetix's later data gave him some support. By June 24, 2020, the weekly reward had dropped to 4,000 SNX8. Kaleb Keny proposed ending it in SCCP-29 on June 24. “Furthermore, looking at the chart of staked tokens against SNX reward amount shows that although rewards have decreased considerably (by around 95%) the amount staked has only halved,” Keny wrote. Synthetix's posts mark the end of the reward on July 23, 20201.
The case against
Vitalik Buterin, Ethereum's co-founder, made the sharpest case on August 31, 202010. “Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul,” Buterin wrote11. Ron Paul served in Congress and called for an end to the Federal Reserve, Decrypt noted.
He said who bears the cost. “It settles down from the PoV of people providing their liquidity to collect coins, it crashes with tears from the PoV of people holding those coins that are getting printed nonstop to pay the liquidity providers,” Buterin wrote in a post Decrypt embedded10. He said he would stay out. “I personally am steering clear of the yield farming space completely until it settles down into something more sustainable,” he said in another post Decrypt embedded.
What to watch
The live question is what stays after the payments end. In Synthetix's case, rewards fell about 95 percent while stake halved8. Each DefiLlama protocol file lets a reader run the same test on any later program131415. Compare the last weekly reward with the deposits still there on the 30th day after it.
Sources
- Synthetix, "Uniswap sETH Pool Liquidity Incentives," Synthetix, July 11, 2019, https://blog.synthetix.io/uniswap-seth-pool-incentives/
- Synthetix, "SNX Arbitrage Pool," Synthetix, July 22, 2019, https://blog.synthetix.io/snx-arbitrage-pool/
- Synthetix, "We're extending the incentive trial for sETH liquidity on Uniswap for an extra week," Synthetix, Aug. 7, 2019, https://blog.synthetix.io/were-extending-the-incentive-trial-for-seth-liquidity-on-uniswap-for-an-extra-week
- Kain Warwick, "SIP-8: sETH Uniswap Pool Staking Incentives," Synthetix, Aug. 2, 2019, https://sips.synthetix.io/sips/sip-8
- Clinton Ennis and Anton Bukov, "SIP-31: sETH LP rewards contract," Synthetix, Nov. 4, 2019, https://sips.synthetix.io/sips/sip-31
- Synthetix, "New Uniswap sETH LP reward system," Synthetix, Feb. 19, 2020, https://blog.synthetix.io/new-uniswap-seth-lp-reward-system/
- Kilgore, "Synthetix looks to unskew itself," Govern This, May 2, 2020, https://governthis.substack.com/p/synthetix-looks-to-unskew-itself
- Kaleb Keny, "SCCP-29: End SNX rewards for sETH/ETH Uniswap pool v1," Synthetix, June 24, 2020, https://sips.synthetix.io/sccp/sccp-29
- Celia Wan, "Compound governance token begins its first day of trading," The Block, June 15, 2020, https://www.theblock.co/news/defi/2020-06-15-compound-governance-tokens-begin-its-first-day-of-trading-68369
- Robert Stevens, "Vitalik Buterin: DeFi Yield Farmers Go Brrr More Than Central Banks," Decrypt, Aug. 31, 2020, https://decrypt.co/40318/vitalik-buterin-ethereum-defi-yield-farmers-central-banks
- Vitalik Buterin, "Post by @VitalikButerin on the volume of coins printed for liquidity providers," X, Aug. 31, 2020, https://x.com/VitalikButerin/status/1300406428289572865
- DefiLlama, "Historical total value locked, all chains (historicalChainTvl API)," DefiLlama, read Oct. 13, 2026, https://api.llama.fi/v2/historicalChainTvl
- DefiLlama, "Synthetix protocol data (protocol API, tvl series)," DefiLlama, read Oct. 13, 2026, https://api.llama.fi/protocol/synthetix
- DefiLlama, "Compound Finance protocol data (protocol API, tvl series)," DefiLlama, read Oct. 13, 2026, https://api.llama.fi/protocol/compound-finance
- DefiLlama, "Uniswap protocol data (protocol API, tvl series)," DefiLlama, read Oct. 13, 2026, https://api.llama.fi/protocol/uniswap