What is Synthetix (SNX)? Liquidity for on-chain derivatives

Synthetix is a decentralized protocol that enables the creation and trading of synthetic assets on the blockchain. It has become a pioneer in the decentralized finance (DeFi) space by providing liquidity for on-chain derivatives.

What is Synthetix?

Synthetix is a decentralized protocol that allows for the creation and trading of synthetic assets, known as synths. These synths can represent a wide range of assets, including cryptocurrencies, fiat currencies, and commodities. Synths are issued as ERC-20 tokens on the Ethereum blockchain and track the price of their underlying assets, enabling users to gain exposure to various markets without holding the actual assets.

History of Synthetix

Synthetix was launched in 2018, initially under the name Havven. It was founded by Kain Warwick, who had previously worked on the Australian crypto payment platform Blueshyft. The project raised $30 million through an Initial Coin Offering (ICO) and soon after rebranded to Synthetix. The core team includes Justin Moses as CTO and Clinton Ennis as senior architect, both bringing valuable experience from their previous roles at MongoDB and JPMorgan Chase, respectively.

How Synthetix works

Synthetix operates on the Ethereum and Optimism networks, providing liquidity for synthetic assets and perpetual futures. The system relies on two key components:

1. Collateral: Users must stake SNX tokens as collateral to mint synths. The required collateral ratio is 650% of the synth's value.

2. Price information: Synthetix uses decentralized oracle networks like Chainlink to obtain real-time price data for the underlying assets.

Synthetix currently offers four categories of synths: crypto, forex, stocks, and commodities.

Synthetix ecosystem

While Synthetix doesn't have its own exchange, synths can be traded on various decentralized exchanges. The Synthetix ecosystem includes platforms like Kwenta for trading, dHedge for asset management, and Overtime Markets for sports betting. The sUSD stablecoin, which tracks the US dollar, is used across multiple applications in the DeFi space.

SNX tokenomics and distribution

The SNX token transitioned to a deflationary model in recent years. The current tokenomics incentivize staking by offering benefits such as interest-free sUSD loans and a share of gas fees to stakers. A portion of fees is also used to buy and burn SNX tokens, reducing the overall supply.

How to buy SNX

SNX can be purchased on various cryptocurrency exchanges. The process typically involves creating an account, verifying your identity, depositing funds (usually USDT), and then placing an order to buy SNX.

Advantages and limitations of Synthetix

Advantages:

• Enables creation of synthetic assets without owning the underlying assets
• Fully decentralized, including price feed mechanisms
• Deflationary token model potentially benefiting long-term stakers

Limitations:

• Limited range of available synthetic assets
• High collateral requirement (650%) for minting synths
• Complexity of use compared to some other DeFi platforms

Conclusion

Synthetix has established itself as a pioneering force in the DeFi world by enabling the creation and trading of synthetic assets. Its innovative approach to bringing non-crypto assets onto the blockchain has opened up new opportunities for crypto traders. While facing some limitations in terms of asset variety and complexity, Synthetix continues to evolve and adapt to the growing DeFi ecosystem. As the broader blockchain and DeFi space develops, Synthetix is likely to play a significant role in shaping the future of decentralized derivatives trading.

FAQ

What is SNX crypto?

SNX is the native token of Synthetix, a DeFi protocol enabling creation and trading of synthetic assets on Ethereum. It's used for collateral and governance.

Does synthetix have a future?

Yes, Synthetix has a promising future. As a leading DeFi protocol, it continues to innovate in synthetic assets and derivatives trading. With ongoing development and growing adoption, Synthetix is well-positioned for long-term success in the evolving crypto ecosystem.

What happened to the SNX coin?

SNX has seen significant growth since 2020, becoming a major DeFi token. It's used for staking and governance in the Synthetix protocol, which has expanded its offerings and partnerships in the crypto ecosystem.