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Synthetix offers a unique approach to DeFi (decentralized finance) through its ability to track and provide returns on underlying (synthetic) assets without requiring one to directly hold the asset. By depositing Synthetix's native token, the SNX token, into a smart contract, users can mint synthetic fiat currencies (or any supported underlying assets) known as synths that can be tracked and traded through the platform or other DeFi platforms.
Formerly called Havven, Synthetix rebranded in 2018 and has built up a solid reputation within the crypto and DeFi ecosystem since.
What is Synthetix (SNX)?
Synthetix is a groundbreaking decentralized asset protection protocol that permits users to mint, hold, and trade derivatives across different asset classes such as commodities, fiat currencies, stocks, and even cryptocurrencies like Bitcoin. This provides an efficient way to gain exposure without needing ownership of the underlying securities or having to rely on centralized intermediaries.
Through the protocol's synthetic assets known as synths, collateralized by the Synthetix Network Token (SNX), users can gain access to classic financial assets and opportunities for new trading strategies while also realizing an increase in the value and liquidity of the underlying assets. The platform also offers binary options, and opportunities to gain capital for different components within the Synthetix ecosystem.
When the platform launched in 2017 it was governed by the Synthetix Foundation, an Australian non-profit foundation. However, by 2020, the ecosystem is now governed by three decentralized autonomous organizations:
- ProtocolDAO: responsible for controlling the funding for protocol upgrades and changes to Synthetix’s smart contracts
- GrantsDAO: responsible for controlling funding for the community proposals for public goods on Synthetix
- SynthetixDAO: responsible for controlling funding for entities that are advancing the network’s development.
Synthetix provides a decentralized, permissionless, and censorship-resistant platform that allows users to gain exposure to both crypto and non-crypto assets without the need for ownership of these assets. This enables anyone with an interest in DeFi to join the industry through the use of synthetic assets regardless of whether they hold the actual assets or not.
Who created the Synthetix platform?
The platform was initially launched by Kain Warwick in 2017 under the name Havven (HAV) before rebranding to Synthetix a year later. Warwick has previously been an Advisory Council Member in Blockchain Australia and an Advisory Board Member at The Burger Collective.
Warwick teamed up with software developer Peter McKean, the platform's acting CEO and business strategist, market analyst, and sales leader, Jordan Momtazi, who acts as COO. The CTO, Justin J. Moses, co-founded Pouncer with Warwick, an Australian live-action site, and has been a part of Synthetix since its conception.
In 2018, the platform raised $30 million through an Initial Coin Offering (ICO) initiative. In 2019, Synthetix raised a further $3.9 million by selling SNX tokens to Framework Ventures.
The initial goal of the platform was to create cryptocurrencies that tracked the performance of cash like the U.S. dollar or the Euro on various blockchains, including Ethereum and EOS. After rebranding, the platform expanded its goals to incorporate synthetic assets for commodities and other cryptocurrencies.
How does the Synthetix protocol work?
Synthetix's synthetic assets minting service is powered by two separate cryptocurrencies. The first cryptocurrency is its native token, Synthetix Network Token (SNX), and the second is synths, a versatile digital asset with the capability to mimic any real-world underlying asset.
In order to generate synths, a user will need to buy SNX and deposit it onto the platform. The platform will then create a new synth token relative to what the user is after. The value of the deposited SNX is then locked and is required to remain at or above 750% of the value of the synth created. I.e. if a user deposited $1,000 worth of SNX to create synthetic Euros, they would receive $133 worth of sEUR.
Economics
As the SNX token is a tradable cryptocurrency its value is dependent on the open market. As the price fluctuates, the number of synths in circulation will also fluctuate. I.e. when the SNX price rises, the protocol will release additional SNX tokens that are not needed to guarantee previously created synths. These SNX tokens can then be locked up again to create new synths.
Using the example above, if the price of SNX doubled this would release half of the $1,000 of SNX tokens locked up. These funds could then be used to create more sEUR synths. The higher the SNX price, the more synths can be created.
Kwenta (DEX)
The Synthetix protocol uses price feeds known as oracles to determine the price of synths. When two synths are exchanged, the first synth is burned (destroyed) and the synth it is being exchanged for will use the price feed to determine its price. The protocol will then automatically create the correct number of synths based on this information.
Another important element of the Synthetix ecosystem is Kwenta, a decentralized exchange (DEX) that facilitates the trading of synths and cryptocurrencies. Kwenta utilizes peer-to-contract trading, using smart contracts instead of an order book.
Bypassing central exchanges and the capacity to deal with large amounts of orders, this peer-to-contract style of trading easily converts currencies and does not require any waiting periods for matches to be fulfilled.
DeFi
As synths are Ethereum-based they can be deposited on other compatible DeFi platforms (Uniswap, Curve) to provide liquidity and earn interest. Alongside derivatives, synths play an integral role in building markets and helping them reach equilibrium by facilitating price recovery and assisting to hedge against volatility.
What is SNX?
Synthetix Network Token (SNX) is an ERC-20 token native to the Synthetix ecosystem. The tokens are used to provide collateral when minting the synthetic assets on the platform, meaning that they are locked up in smart contracts when synths are created, and can also be used for staking. When deposited into the staking pool holders earn rewards, which are generated through transaction fees paid on the Synthetix Exchange.
Through the derivatives liquidity protocol, the exchange also provides a platform for trading synths (digital assets portraying real-world assets).
There is a maximum supply of 308,069,419 SNX, of which there are roughly 81% in circulation (at the time of writing).
How can I buy Synthetix (SNX) tokens?
Anyone can add SNX tokens to their cryptocurrency portfolio with the Tap app. This intuitive mobile app allows for a comprehensive and secure experience when trading cryptocurrencies. Creating and verifying an account is straightforward, allowing anyone easy access to buy or sell Synthetix Network Token (SNX) safely.
Tap into the Synthetix market with Tap's integrated crypto wallet and buy SNX tokens using both fiat currencies and cryptocurrencies. Download the app and create an account to get access to buy, sell, hold and trade SNX.
