Synthetix
SNX to USDProject history
Originally launched as Havven in 2017, Synthetix is a decentralised derivatives liquidity protocol that operates on the Ethereum blockchain. The project allows the creation of synthetic assets, known as Synths, that track the value of real-world assets such as currencies, commodities, and stock indices. Instead of providing direct ownership or claims to the underlying assets, Synths offer exposure to their price movements through digital tokens.
The platform utilises the Synthetix Network Token (SNX) for collateralisation, requiring users to lock up SNX to mint Synths. This process, governed by smart contracts, aims to ensure that each Synth is backed by sufficient collateral value, maintaining its price linkage to the real-world asset it represents.
Technology
Synthetix utilises smart contracts to enable the creation of Synths, which are digital representations of real-world asset prices. Users begin by staking SNX tokens as collateral, exceeding the value of the Synths they wish to mint, a process known as overcollateralisation. This excess collateral requirement safeguards the platform against volatility and ensures the stability of Synths.
Oracles are integral to Synthetix, providing accurate, real-time price data for the underlying assets. These decentralised networks source price information from multiple exchanges, ensuring Synths reflect true market values. Through this combination of overcollateralisation and reliable price feeds, Synthetix offers a stable environment for trading synthetic assets.
In addition to standard Synths, Synthetix also offers inverse Synths (iSynths), which allow users to gain exposure to the inverse performance of an asset. For instance, if the price of an asset falls, the value of its inverse Synth would rise, and vice versa. This feature enables traders to hedge against price movements or speculate on price declines without the need to hold the actual asset or short it.
Token Supply Model
The SNX token has a capped total supply of approximately 215 million tokens. New SNX tokens are created through a programmed inflationary process, aimed at incentivising staking for network security and growth. This inflation decreases over time, intending to match network expansion with a manageable approach to the token supply and distribution of rewards, until reaching the fixed supply cap.
Key Value Drivers
Synthetix benefits from increased DeFi market activity, as this typically leads to higher traded volumes and increased demand for derivatives and synthetic assets. The increased volumes would generate more fees and rewards, which is distributed to SNX tokenholders.
Disclaimer: The information in this publication pertaining to Sygnum Bank AG (“Sygnum”) is for general information purposes only, as per date of publication, and should not be considered exhaustive. This publication does not consider the financial situation of any natural or legal person, nor does it provide any tax, legal or investment advice. This publication does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum to purchase or sell any assets. No elements of precontractual or contractual relationship are intended. While the information is believed to be from accurate and reliable sources, Sygnum makes no representation or warranties, expressed or implied, as to the accuracy of the information. Sygnum expressly disclaims any and all liability that may be based on such information, omissions, or errors thereof. Any statements contained in this publication attributed to a third party represent Sygnum‘s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Sygnum reserves the right to amend or replace the information, in part or entirely, at any time, and without any obligation to notify the recipient of such amendment / replacement or to provide the recipient with access to the information. Simultaneously, there is no obligation of Sygnum to inform recipients of information, if before provided information later becomes outdated, inaccurate or obsolete, unless otherwise provided by applicable law. The information provided is not intended for use by or distributed to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Sygnum does not hold the necessary registration, approval authorisation or license. Except as otherwise provided by Sygnum, it is not allowed to modify, copy, distribute or reproduce, display, license, or otherwise use any content for commercial purposes.