Editing Synthetix (section)

== Backdoors ==

A key benefit of smart contracts is the ability to create protocols that operate deterministically with minimal trust. One can automate a broad number of contracts without ever having to depend on trusted third parties to play a key role in the system.

In Synthetix Exchange the benefits of smart contracts are lost because most aspects of the exchange can be controlled by the contract owners: They are free to suspend trading pairs. Liquidate positions. Set price feeds directly. Change SNX:sUSD ratios. Really, anything that you might want to set in as an investor can be changed by the admins [backdoor].

There are no client-side checks for adverse parameter selection within the contract state. You are trusting that the state in the exchange hasn’t been tampered with, and there is already at least one way to render the whole exchange userless. For example: the admin can set the settlement time to zero and it will make every trade fail forever. In this sense, no contract made on the exchange can ever be considered final or fully trustless.

For what it’s worth: the correct way to design contract systems that need to be upgraded in the future is to build in a signed update channel with clear change logs and allow users to decide whether or not they want to accept an upgrade. Given that Synthetix can change anything they want at any time it also puts them in a position where a lawmaker can easily argue that they are operating an unlicensed exchange. Whereas, if the system were designed securely that could not happen.

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