What is Synthetix (SNX)?

Synthetix presents a complex yet innovative approach to asset trading and exposure in the DeFi space, backed by its native SNX token and governed by its community of stakeholders. Synthetix is primarily focused on establishing a decentralized protocol for liquidity provision. This protocol is accessible to various other projects for a range of applications. The key attributes of Synthetix that make it stand out are its deep liquidity and competitive fee structure. These features are particularly beneficial as they provide a robust backend infrastructure for numerous exciting protocols operating on both the Optimism and Ethereum blockchains.

This setup allows Synthetix to offer a wide array of services, including facilitating the trade of synthetic assets, known as "Synths", and providing a platform where these assets can be easily created and exchanged. These Synths are derivative-like instruments that mimic the value of other assets, such as fiat currencies, commodities, or cryptocurrencies, without requiring ownership of the underlying assets. This allows users to gain exposure to a wide range of asset prices. By leveraging the Ethereum blockchain's security and Optimism's scalability, Synthetix aims to offer a seamless and efficient experience for users engaging in DeFi activities.

How does Synthetix (SNX) work?

Synthetix operates through a token known as SNX, the Synthetix Network Token. Holding SNX allows users to create Synths by locking SNX into a smart contract. The system requires over-collateralization; for instance, to mint Synths, a user needs to lock a significantly higher value in SNX than the value of the Synths being minted. This over-collateralization aims to ensure that Synths are fully backed and maintain their value.

The Synthetix platform leverages a shared collateral pool, enabling users to convert between different types of Synths without needing a counterparty. For example, someone holding synthetic USD (sUSD) can convert it to synthetic AUD (sAUD) based on the current exchange rate, all within the Synthetix ecosystem.

SNX holders also play an active role in maintaining the system. They act as issuers of Synths and maintainers of the network's collateralization. These holders are incentivized through a portion of the transaction fees generated by Synth trades and by SNX staking rewards stemming from the network's inflationary token mechanism. The governance of Synthetix is decentralized and managed through the Synthetix DAO (Decentralized Autonomous Organization), where SNX holders have voting rights on proposals affecting the protocol. 

What makes Synthetix (SNX) unique?

Synthetix (SNX) stands out in the decentralized finance (DeFi) sector due to several unique features:

Trade Synths without Intermediaries: Synthetix allows users to trade synthetic assets, known as Synths, directly with each other. This is made possible by a mechanism called peer-to-contract (P2C) trading, which removes the need for traditional order books. This innovation ensures quick and efficient trading without requiring a counterparty.

Diverse Range of Synthetic Assets: The platform supports a wide variety of Synths, which are labeled with a prefix 's', like sUSD or sGOLD. These Synths mimic the value of real-world assets, including cryptocurrencies, fiat currencies, commodities, and even indexes, providing users with exposure to a broad range of assets without needing to own them directly.

Overcollateralization and Minting of Synths: To create Synths, users stake SNX tokens as collateral. This overcollateralization is a crucial aspect of the platform, ensuring the stability and security of the synthetic assets issued. The required collateralization ratio for SNX is typically high, at around 400%, which helps maintain the system's integrity.

Governance and Decentralization: SNX holders have a significant role in the governance of the Synthetix ecosystem. They can participate in decision-making processes and vote on various proposals, shaping the future direction of the platform. This decentralized governance structure is crucial in maintaining the protocol's adaptability and alignment with the community's interests.

Incentives for Participation: SNX stakers are incentivized through various rewards. These include a share of the transaction fees generated on the platform and rewards from the protocol's inflationary token mechanism. This system encourages active participation and maintains the health and liquidity of the Synthetix ecosystem.

Integration with Ethereum and other DeFi Protocols: Synthetix is built on the Ethereum blockchain, benefiting from its security and smart contract capabilities, also leveraging Optimism for scalability. Synths, being ERC-20 tokens, can be integrated with other DeFi protocols, allowing users to deposit them in liquidity pools on platforms like Uniswap and Curve, and earn trading fees.

Advanced Features for Traders: Synthetix's model of "infinite liquidity" and no slippage, thanks to its unique trading mechanism, is especially advantageous for traders. It differs significantly from traditional exchanges by allowing trades to be executed against a debt pool rather than individual counterparties.

The combination of these features makes Synthetix a unique player in the DeFi space, offering a versatile and comprehensive platform for trading and managing synthetic assets.

The SNX token: Utility & tokenomics

The Synthetix Network Token (SNX) is a critical component of the Synthetix ecosystem, playing multiple vital roles in its operation and governance:

Utility in Minting Synths: SNX is primarily used for minting synthetic assets, known as Synths. These Synths replicate the value of real-world assets like currencies, commodities, and cryptocurrencies. By staking SNX tokens, users can generate these Synths, effectively creating a position of debt that needs to be managed. This staking requires a high collateralization ratio, historically around 400%, ensuring the system's stability and the integrity of the Synths issued.

Governance Role: Another significant aspect of the SNX token is its use in governing the Synthetix platform. Holders of SNX can participate in the Synthetix DAO (Decentralized Autonomous Organization) governance, influencing the platform's direction and development. They have the right to propose and vote on changes to the protocol, including modifications to the collateralization ratio and other key parameters.

Incentives for Holders: SNX holders are incentivized to stake their tokens through various rewards mechanisms. They earn a portion of the transaction fees generated from Synth trades on the platform’s decentralized exchange (DEX), known as Kwenta. Additionally, the SNX staking rewards are derived from the network's token inflation mechanism, encouraging users to maintain a specific collateralization ratio for earning these rewards.

Economic Model and Tokenomics: Synthetix's economic model has evolved over time, addressing concerns such as liquidity and the suitability of SNX as collateral. Proposals like the SIP-315 suggest creating specialized pools like the Spartan Pool to balance the use of SNX in the ecosystem and align its governance power with collateral value. These adjustments aim to maintain SNX's relevance and utility within the expanding Synthetix network.

Token Allocation and Distribution: Initially, the SNX token allocation was diversified, with a significant portion allocated to investors and token sales, followed by allocations for the team, advisors, foundation, partnerships, and marketing incentives. The token's supply schedule was initially inflationary, with plans to cap the total supply at a certain point to control inflation and manage the token's economic impact.

As of January, 2024, SNX has a current Circulating Supply of 304,277,324 tokens and a Total Supply of 328,193,104, with a Market Cap of $1,085,909,308. 

History of Synthetix (SNX)

Initially, Synthetix (SNX) began as Havven (HAV) in 2017, founded by Kain Warwick, a well-known figure in the blockchain industry. Havven's primary goal was to create a stablecoin that could compete with existing centralized stablecoins like Tether (USDT). However, facing regulatory challenges, the project pivoted towards a different model, focusing on synthetic assets.

In 2018, the project underwent a significant transformation, raising $30 million through an Initial Coin Offering (ICO) and rebranding to Synthetix. The rebranding wasn't just a name change; it marked a strategic shift towards creating and managing synthetic assets, which are ERC-20 smart contracts that track and provide returns on other pre-specified underlying assets.

The SNX token, originally issued as part of the Havven project, transitioned into an integral part of the Synthetix ecosystem. Its role expanded beyond just a digital currency, becoming a tool for minting Synths, participating in the Synthetix DAO governance, and earning various rewards through staking and the network's transaction fees.

Synthetix also embraced an inflationary token supply mechanism to incentivize stakers, with an evolving plan regarding the total token supply and inflation rate. Proposals and discussions within the Synthetix community have aimed at balancing the token's supply and demand dynamics to support the network's growth and stability.

Throughout its development, Synthetix has been governed initially by the Synthetix Foundation, but later, the governance shifted to a more decentralized model with three DAOs (Decentralized Autonomous Organizations). These DAOs – ProtocolDAO, GrantsDAO, and SynthetixDAO – play distinct roles in managing different aspects of the project, from protocol upgrades and funding community proposals to overseeing the overall development of the protocol.

A key moment in Synthetix's history is the introduction of Synthetix V3. This represents a complete overhaul of the protocol, aiming to establish a permissionless derivatives liquidity platform. It brings a vision of Synthetix as a liquidity layer for DeFi derivatives, offering tools for builders to create financial derivatives and integrating a multi-collateral staking system. This shift emphasizes Synthetix's commitment to innovation and adaptability in the rapidly evolving DeFi landscape.

Price history and performance of Synthetix (SNX) 

The SNX token hit the markets in March 2018 at a price value of $0.46. After a short-lived bump to $0.7 in the following months, SNX traded downwards and remained under its initial listing value until October, 2019, trading roughly in the range of $0.03 - $0.3. 

Towards the end of 2019, SNX was trading in the green, at values 3 times bigger than its initial listing price. But its first real breakthrough occurred during the 2020’s DeFi Summer - in August that year, SNX peaked above $7.3 and was now well integrated into the DeFi ecosystem with its liquidity provision and asset tokenization offerings.

The best was yet to come and after a moderate retrace, the Synthetix token embarked on a ballistic bull run, reaching its all-time high above $26 in February, 2021. Increased volatility followed, and after an abrupt descent in June to levels of $5-6, SNX bounced back to $15 in September. 

SNX kept resembling the entire crypto market pattern at large, and in June, 2022, it reached a low of $1.7, as most assets were now tanking. Since then, SNX traded roughly in the range of $1.5 - $5. As of January, 2024, SNX is trading for around $3.5.

How to buy Synthetix (SNX)?

You can simply buy and sell SNX on the Coinmetro exchange in just a few seconds. Sign up for an account, if you are not already registered, deposit funds instantly and buy SNX and 80+ other crypto assets with just a few clicks. 

Buy SNX

Join the Coinmetro community on Discord and Telegram, where forward-thinking traders and investors gather to share insights, explore new opportunities, and dive deep into the world of cryptocurrencies. Should you need any help, feel free to reach out to our world-class Customer Support Team via 24/7 live chat or email at hello@coinmetro.com. 

To become a Coinmetro user today,  Sign Up now, or head to our new Exchange if you are already registered and experience our premium trading platform.