Synthetix Network Token
What is Synthetix Network Token?
Synthetix is a decentralized liquidity provisioning protocol that allows various protocols to tap into its deep liquidity and low fees. The Synthetix Network is built on Optimism and Ethereum Mainnet and is collateralized by SNX, ETH, and LUSD. This pooled collateral enables an array of on-chain, composable financial instruments backed by liquidity from Synthetix. These financial instruments include spot and futures trading through Kwenta, options trading through Lyra, automated options through Polynomial, and atomic swaps through 1inch & Curve.
Synthetix was founded by Cain Warwick, who graduated from UNSW Sydney with a BSC in Genetics. In addition to his role as a founder of Synthetix, he is an advisory board member and investor in The Burger Collective, the founder and non-executive director of Blueshyft, and an advisory council member of Blockchain Australia.
When Synthetix first launched in 2018, it allowed its customers to trade a range of assets, including gold and silver, using decentralized protocols. The advantage of trading these synthetic assets on Synthetix is that it allows users to profit from possessing the synthetic equivalent of real-world assets without owning them. However, as of June 2022, assets represented by Synths have shrunk to representing only crypto, forex, and an index that traces DeFi. The platform’s current locked value sits at over US$300 million locked as of June 2022.
Synthetix works by enabling the issuance of synthetic assets on the Ethereum blockchain. These synthetic assets, known as Synths, are analogous to derivatives in TradFi, but in the form of ERC-20 smart contracts. Synths track the assets they represent and provide the returns without requiring users to hold the asset itself. This is accomplished through the use of decentralized oracles, which are smart contract-based price discovery protocols, to track the prices of the assets represented.
Synthetix issues multiple cryptocurrencies. The first is Synthetix's native token, SNX. Second are the Synths, the tokens that represent assets and mirror their pricing (e.g., sEUR, sUSD, and sJPY). The Synths can be traded on Kwenta, Synthetix’s decentralized exchange (DEX).
In addition to its decentralized exchange, Synthetix also has other platforms built on top of its protocol. These include platforms for trading decentralised perpetual futures, options, and deal coordination markets. The Synthetix ecosystem is further leveraged by protocols including Yearn, Curve, and DHedge for liquidity, lowering slippage, and hedging.
SNX, Synthetix's native token, is used for several purposes on the platform. First, it is used as collateral against the Synths that users want to acquire. Second, users can stake SNX tokens on the platform. When stakers mint Synths, they obtain the right to a predetermined amount of inflation and fees on Synth trading. However, in order to leave the system (i.e., release their SNX), they must repay the loan by burning the percentage of Synths they created.
Overall, Synthetix is a powerful decentralized finance protocol that offers a wide range of financial instruments and assets to its users. By leveraging its deep liquidity and low fees, it is able to provide a robust and reliable service to the DeFi community. To learn more about Synthetix, you can visit their blog or join the SNX Discord.
The investment information, comments, and recommendations provided here do not fall under the scope of investment consulting. Therefore, making an investment decision based solely on the information and comments provided here may not yield results that meet your expectations.
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