What is Synthetix?Synthetix is a DeFi protocol built on Ethereum that specializes in issuing synthetic assets. Their native token is Synthetix Network Token (SNX). To issue synthetic assets, Synthetix’s SNX native token must be locked in a contract. Synthetic assets represent real-world assets on the Synthetix network and are called synthetic assets.
Synthetix’s Collateral Model
The collateral model followed by Synthetix has multiple benefits in the issuance of synthetic assets. First, it eliminates the need for any counterparty when converting between synthesizers. Instead, all conversions between synthesizers are performed via smart contracts. Another benefit of this model is that it solves the liquidity and slippage issues common in decentralized exchanges.
Types of Synthesizers: Synthetic assets mimic real-world assets in terms of price. There are a wide variety of synthetic assets that can be traded on Synthetix, and it’s not just limited to cryptocurrencies. Currently, there are four main types of assets available for trading on Synthetix: cryptocurrencies, forex, stocks, and commodities.
cryptocurrency
At the time of writing, there are 36 cryptocurrency synths available for trading on Synthetix, including sBTC, sETH, sBNB, sLTC, sLINK, sETS, sXMR, and more.
Forex: Synthetix supports trading in 7 synthetic currencies, including sUSD, sJPY, sEUR, and more.
Stocks: Users can trade three stocks on Synthetix: sFTE, sNIKKEI, and sTSLA.
Commodities: Commodities available for trade on Synthetix include sXAU (gold), sXAG (silver), sOIL and iOIL (oil).
Revenue from the Synthetix Platform
Users can also choose to stake their SNX tokens on Synthetix. In return, they will receive a portion of the fees generated on the Synthetix platform in proportion to their contributions. This means that using SNX tokens, users can earn a portion of the fees earned by Synthetix exchanges. In addition, they gain the right to participate in the Synthetix network.
Synthetix History: Synthetix is the brainchild of Cain Warwick. He holds a Bachelor of Science degree in Genetics from the University of New South Wales, Sydney. In addition to being the founder of Synthetix, he is an advisory board member and investor in The Burger Collective, founder and non-executive director of Blueshyft and an advisory board member of Blockchain Australia.
The first synthetic coin on Synthetix was released on November 20, 2018, and it was nUSD, a stablecoin. At launch, the project was not called Synthetix but Havven. The name was changed to Synthetix in December of the same year. Today, Synthetix has benefited from the rapid development of the DeFi field and has made great progress. It became one of the leading brands and experienced tremendous growth within a few years. Now, Synthetix is one of the largest DeFi protocols with $166 million in locked value.
What problem does Synthetix solve? Access hard-to-reach assets: Synthetix enables users to gain access to assets they would otherwise not have access to. For example, users unable to purchase Tesla stock can go to Synthetix, stake SNX tokens, and receive sTSLA in return. In many places, it is difficult for people to find a trusted platform to trade real-world assets, and this can be for a variety of reasons, including regulatory challenges.
Slippage and liquidity issues
Since Synthetix is a DeFi platform, any user in the world with an internet connection and SNX tokens in their wallet can create synthetics that mimic the prices of real-world assets like gold, silver, Bitcoin, Ethereum, oil, and more. Many users may also prefer trading on Synthetix because unlike traditional financial platforms, it does not require users to complete a KYC process to trade on the platform.
Synthetix solves slippage and liquidity issues common in decentralized exchanges. Synthetix does not experience slippage and liquidity issues because no counterparty is required to facilitate transactions between synthesizers on the platform.
How Synthetix works
The most critical part of Synthetix is the decentralized oracle, which Synths use to track the prices of real-world assets. Decentralized oracles feed real-world asset prices to Synthetix in real time. Therefore, holding synthetic assets is similar to owning real-world assets in that they mimic the underlying asset.
Synthetix uses a decentralized protocol that allows users to trade a variety of assets, including gold and silver. The great thing about trading synthetics like gold, silver, etc. on Synthetix is that you can easily trade and benefit from holding synthetic versions of real-world assets without actually owning them.
Synthetics are not tokenized assets. For example, purchasing a tokenized asset backed by a real-world asset like gold gives you rights to the underlying asset. However, owning Synths does not mean you are the owner of any underlying assets that exist outside of the Synthetix Network. In contrast, purchasing synthetic assets only gives you exposure to the corresponding asset, but not ownership of the underlying asset.
You can also leverage platforms like Uniswap to earn interest on your synthetics by providing liquidity. After all, compositions are also issued on Ethereum. The increasing demand for synthetic assets means that the market has reached a point where traders can use synthetic assets to hedge against volatility, which is a sign that the market is maturing.
How Synthetix works
Synthetix utilizes two cryptocurrencies to mint synthetic assets. The first is SNX, Synthetix’s native token. The second token is Synth, which represents a real-world asset and mimics its price.
Suppose the user wants to generate a synthesizer. First, users must purchase SNX and then stake SNX tokens on Synthetix. After completing these steps, the user will receive the synthesizer of his choice from the Synthetix platform. But there is one thing that users must remember when creating a synth – the value of the staked SNX tokens must be equal to or greater than 750% of the synth’s value. To better understand the rule, imagine a scenario where a user deposits €5,000 worth of SNX tokens to create sEUR. In return, users will receive sEUR worth $666.
Synthetix Token (SNX)
As we said at the beginning, Synthetix wasn't always known by this name. In its early days, the project was originally called Havven. It also raised $30 million through an ICO. At the time these tokens were called Havven tokens and their total supply was only 100 million. But in December 2018, Havven pivoted and relaunched as Synthetix. Now, its token is called Synthetix and has a total supply of 250 million coins.
According to the SNX token distribution schedule, by September 2020, the total number of SNX tokens will be 175 million. From that date until 2024, the supply of SNX tokens will increase every year. The first increase will be in September 2021, when the SNX supply will increase from 175 million to 212.5 million, which represents a 21% increase. The next increase in the SNX token supply will be in September 2022, when the number will increase to 231.25 million.