Benefits & Drawbacks

Benefits:

· Significantly less or 0% collateral needed with this model. Other platforms outlay a 500% collateral, whereas Synfy outlays 0% collateral or a far smaller amount of collateral required.

o Collateral ratio can change depending on volume. The asset is 1-1 pegged and backed by the underlying, so no actual collateral is required as the P&L is pegged directly to the asset.

· Leverage – in some assets 90% collateral can be deployed to gain 100% exposure. For example, to buy $100 worth of sy-<TOKEN> only $90 of collateral needs to be deployed.

· Vast Universe potential - More Synthetic assets can be made available to trade – otherwise assets would be limited by collateral held in the secondary debt pool model.

· Backed – Assets are pegged 1-1 to their underlying. There is low risk of default.

· Dividends could be paid, using this model. As it is 1-1 pegged.

· Works where order size < = debt pool liquidity availability. For large orders or orders that exceed total debt pool capability can be serviced with this Level 1 model.

· The choice is up to the user whether they wish to realize any currency loss or gains – as trades are settled back in in stablecoin - (Tether, USDC, syUSD or FIAT).

· Increased Stability – As the asset is hedged by the underlying, the system is far more stable. It is less likely to break down or be paused. Every token is of intrinsic value. Future regulation also appears to favour 1-2-1 backed assets over algorithmic ones.

Synfy provides the initial FIAT capital upfront for smaller orders. And for larger orders it asks the user to await order confirmation.

Drawbacks:

· Slower Speed - Note that the Level 1, is a temporary hybrid centralized mechanism. It is also a slower mechanism. This is so until platform can move to more decentralized model debt pool (Level 2) that can provide adequate liquidity at faster speeds. It is more suited for non-intraday trading users.

· Minimum order sizes – due to the higher fees incurred by Synfy from counterparties. Level 1 has minimum order sizes enforced to make the system more cost efficient.

· Higher fees – typically higher fees as incurred by Synfy from counterparties

· Limited Daily Liquidity - MVP - $60,000 per day in liquidity provisioned - There is maximum allowed daily trading volume of $30,000 per day opening, and $30,000 closing. First in first served model. This may not serve the interests of larger high frequency traders or larger day traders. However, Synfy is working on improving the allowed daily trading volume as Synfy grows.

o There would be an unlimited order book queue size with cancellation. A given user can put in as many orders as they desire e.g. totalling $150,000 per day. However only $60,000 of orders per day will be accepted and executed.