Synthetix (SNX): What It Is, Advantages and How It Works

Synthetix (SNX) is a decentralized financial project built on the Ethereum blockchain network, implementing the ERC-20 standard. On the Synthetix platform, users can trade digital currencies, fiat currencies, and various commodities. The primary goal of Synthetix is to create artificial assets, allowing any real-world valuable asset to be converted into a synthetic asset within Synthetix to evaluate its price. The SNX token, the native token of the Synthetix platform, serves as collateral for the issuance of synthetic assets.

Addressing user concerns about incorporating traditional financial market assets into the cryptocurrency market, the Synthetix protocol establishes a connection between traditional or off-chain spaces and the new decentralized space. The protocol tokenizes underlying assets, spanning commodities to fiat money, and releases them as derivative and hybrid assets. In this article, we’ll explore Synthetix in-depth by reviewing its services, products, management team, roadmap, project goals, and the introduction of the SNX digital currency.

Understanding the Synthetix (SNX) Protocol:

Synthetix operates as a derivative liquidity protocol on the Ethereum blockchain, facilitating the issuance and trading of hybrid assets. These assets can include fiat currencies, digital currencies, gold, stocks, and more. The SNX token, an ERC20 token, reflects the price of foreign assets, supporting any asset with a fixed price and providing on-chain access to a myriad of real-world assets. The protocol offers various trading modes, such as binary options and futures contracts.

Synthetix functions as a decentralized hybrid asset issuance protocol on both the Ethereum and Optimism networks. Collateralized by the SNX token, these assets are locked in a smart contract, authorizing the issuance of compound assets. The SNX token, built on the Ethereum blockchain, enables the creation of hybrid assets, allowing users to track the price of different assets.

The Goals of Synthetix (SNX):

Initially known as Havven, the Synthetix network aimed to create a stablecoin comparable to the US dollar or Euro. Following a rebranding to Synthetix, their goals expanded to offering a mix of assets, including cryptocurrencies and commodities. The SNX currency’s use model aligns closely with that of many stablecoins.

Functionality of the Synthetix (SNX) Crypto:

The Synthetix Network Token (SNX) operates through a smart contract system with incentives to maintain its price. Acting as collateral, a proportional amount of SNX must be pledged to issue synthetic assets. Investors are rewarded with a percentage of fees generated by network activity, tying the value of the SNX token directly to network usage.

To create Synth Assets, users acquire SNX tokens and hold them in their wallets. The price of each synthetic asset is determined through oracles, often facilitated through partnerships, such as with Chainlink.

Key Features Setting Synthetix (SNX) Apart:

In the Synthetix network, a 750% collateral requirement exists to issue Synths, creating a secure intermediary for circulating tokens. The Synthetix Decentralized Exchange enables users to buy and sell SNX tokens without relying on a third party. The value of hybrid assets is determined through oracles, ensuring real-time on-chain pricing.

Synthetix incorporates a unique inflation system for its digital currency. The total number of SNX tokens in circulation is set to increase from the initial 100 million to approximately 250 million by 2024. This inflation is distributed among Synth issuers, addressing the need for additional incentives beyond exchange fees.

Synthetix (SNX) Network Cryptocurrency Roadmap:

The SNX Currency Roadmap provides a comprehensive visual overview of project priorities, plans, and progress. It serves as a reliable resource for analyzing the Synthetix currency, aiding potential investors in making informed decisions. Understanding the SNX currency roadmap is crucial to assessing the evolution of the network.

1. Change in Monetary Policy (March 2019):
   • Supply of synthetic digital currency increased from 100 million to 250 million over five years.
2. Adding Synths (September 2019):
   • Introduced long and short synths for Trx, Xtz, Mkr, and synth stocks and indicators.
3. Lending Partnerships (September 2019):
   • Partnered with a reputable lending company, enabling users to use susd loans for Ethereum or Dai.
4. Canopus Release (October 2019):
   • Officially introduced seth liquidity provider rewards for those holding the seth/eth currency pair in Uniswap.
5. Rigil Release (November 2019):
   • Optimized gas estimation for synthetics transactions in UniSwap.
   • Reduced c-ratio buffer from 10% to 1%.
   • Doubled the cost of switching between s-synth and i-synth.
6. Arturus Release (November 2019):
   • Aimed at reducing transaction fees, auditing updates to the network, saving gas costs.
   • Added sltc, sxrp, and slink.
7. Vega Release (November 2019):
   • Upgraded the Synthetics network, removing the ability to cut, burn, or claim rewards on any site except susd.
   • Enhanced leading bots’ ability to benefit from price changes without paying transaction fees.
8. Capella Release (December 2019):
   • Altered monetary policy, smoothing distribution by 25.1% instead of halving it at the end of the year.
9. Procyon Release:
   • Anticipated reduction in gas costs in exchanges.
   • Elimination of transaction errors in Etherscan.
10. Betelgeuse Release:
    • Addition of a time lock to burn tokens after multiplication.
    • Gas optimization between 35% and 45%.
11. Hader Release (March 2020):
    • Aimed to reduce gas consumption, enhance exchange success, simplify token transfers, upgrade the system, increase network security, and facilitate token burning.

Founders of Synthetix Platform:

1. Cain Warwick:
   • Founder and non-executive director of Synthetix digital currency.
   • CEO and founder of Blueshyft, a payment network in Australia.
2. Jordan Momtazi:
   • Operational manager of the Synthetics project.
   • Experienced in financial market analysis, business strategy design, and sales leadership in digital currencies and blockchain systems.
3. Peter McKean:
   • CEO of the Synthetics Project.
   • Over 20 years of experience in software development, including work as a programmer at ICL Fujitsu.
4. Justin J. Moses:
   • Chief Technology Officer at the Synthetics project.
   • Founder of Pouncer, with prior roles as Engineering Director at MongoDB and Lab49.

Projects Synthetix Protocol Has Cooperated With:

• Chainlink (March 2019):
  • Collaboration to launch decentralized price information on the trading platform, utilizing Chainlink’s Oracle network.
• THORChain (November 2019):
  • Strategic cooperation to strengthen both parties.
  • SNX currency listed on the ASGARDEX platform, a Turkish exchange.
  • sRUNE listed on Synthetix.Exchange.

Exchanges for SNX Trading:

• Centralized Exchanges:
  • Binance, Coinbase, Huobi, KuCoin, OKX, Crypto.com.
• Decentralized Exchanges (Dexes):
  • UniSwap (versions 2 and 3), SushiSwap, SpookySwap, Balancer, Turchin.

These exchanges offer opportunities to buy and sell SNX, providing users with various options based on their preferences.

Advantages of Synthetic Digital Currency:

1. Rewards for SNX Holders:
   • Users holding SNX receive rewards, both in exchange for SNX and based on inflationary monetary policies. This provides an incentive for users to participate in the Synthetix network.
2. Potential Token Market on Ethereum Blockchain:
   • Synthetix has the potential to establish a token market on the Ethereum blockchain, leveraging the vast size of traditional financial markets.
3. Ease of Storage with ERC-20 Standard:
   • SNX being an ERC-20 based token ensures compatibility with a wide range of wallets, making it convenient for users to store and manage their holdings securely.
4. Trustless Transactions on Synthetics Platform:
   • Users on the Synthetics platform can easily exchange and conduct business without the need to trust or know the other party. The decentralized nature of the platform enhances trustless transactions.

Disadvantages of Synthetic Digital Currency:

1. High Collateral Requirement for Synth Creation:
   • To create a Synth, users must lock in SNX tokens for more than 750% of the value of the generated Synth. This high collateral requirement may limit the ability of some users to participate in creating Synths.
2. Dependence on Ethereum and Centralization:
   • Synthetics’ dependence on the Ethereum blockchain introduces a vulnerability, as any issues with the underlying blockchain can impact the Synthetix protocol. Additionally, concerns about centralization may arise, affecting the trustworthiness of the platform.
3. Price Sensitivity to Bitcoin and Ethereum:
   • The Synthetics token price is strongly influenced by the performance of Bitcoin and Ethereum. This dependency on larger cryptocurrencies can lead to increased volatility and may limit the stability of the Synthetix ecosystem.
4. Mismatch in Values between SNX and Synth Tokens:
   • The values of SNX and Synth tokens may not align perfectly, and sometimes they may move in opposite directions. This introduces complexity and potential challenges for users looking for a consistent relationship between the value of SNX and the Synths they create.

In summary, while Synthetic Digital Currency offers various advantages such as rewards for holders and the potential to establish a market on Ethereum, it also faces challenges related to high collateral requirements, dependence on external factors, and potential mismatches in token values. Users and investors should carefully consider these factors when engaging with the Synthetix ecosystem.

SNX Digital Currency Ecosystem:

Synthetix operates within a robust ecosystem, featuring various platforms that leverage its capabilities for energy and growth. Understanding the SNX currency ecosystem is essential for individuals looking to invest in or engage with SNX. Here are some key platforms within the SNX ecosystem:

1. Curve Finance:

• Integration with Synthetix: Curve Finance is a fundamental component of the Synthetix ecosystem, integrated to provide precise pricing for various pairs. This integration ensures affordable pricing and lower fees, making Curve an attractive platform for traders.

2. Lyra:

• Decentralized Protocol: Lyra is recognized as the first fully decentralized protocol integrated with Synthetix. This integration facilitates seamless transactions, offering low fees and fast transaction processing.

3. Thales:

• Wide Range of Trading Options: Thales provides users with an extensive array of trading options through its protocol. Fully supported by Synthetics, traders can utilize sUSD from Synthetics for their transactions. Thales employs Chainlink to guarantee accurate asset prices, free from significant fluctuations.

4. Kwenta:

• Decentralized Trading Platform: Kwenta is a decentralized trading platform entirely covered by Synthetix. Users can trade both real and derivative assets using sUSD. Running on a layer 2 protocol, Kwenta plays a crucial role in the success of Synthetix.

5. ParaSwap:

• Liquidity Aggregator: ParaSwap is one of the largest liquidity aggregators in the DeFi space, offering users access to synths and enhancing liquidity in the ecosystem.

6. dHEDGE:

• Informed Decision-Making: dHEDGE empowers users to make informed investment decisions, reducing investment risks. The platform offers users access to some of the best investment pools in the crypto space, providing an opportunity for investors to earn substantial income.

7. Yearn Finance:

• DeFi Platform Backed by Investors: Yearn Finance is a unique DeFi platform backed by numerous investors. It attracts and encourages participation in the hybrid asset generation ecosystem, contributing positively to the expansion and development of Synthetics.

8. Aelin:

• Unique Protocol: Aelin is a unique protocol aligned with the principles of Synthetics. Users can conduct transactions on this platform without requiring a special license, contributing to the accessibility and openness of the Synthetix ecosystem.

In summary, the SNX digital currency ecosystem is comprised of diverse platforms that enhance its functionality, offering users various options for trading, liquidity provision, and informed investment decisions. This ecosystem reflects the collaborative and expansive nature of Synthetix within the decentralized finance (DeFi) space.

Different Sections of the Synthetix Network:

1. Assets (Synths):

• Categories: Crypto, Forex, Equities, and Commodities.
• Crypto: 41 popular market currencies.
• Forex: 7 assets representing fiat currencies (USD, EUR, JPY, GBP, AUD, CHF, KRW).
• Equities: Tokens representing shares of major companies (e.g., Apple, Facebook, Amazon), NIKKEI, FTSE indices.
• Commodities: Tokens representing valuable goods like gold, silver, and oil.

2. Staking:

• Users can deposit SNX tokens to generate Synths, usable in decentralized applications and exchanges.
• Participants receive staking rewards and a share of Synth trading fees on decentralized exchanges.

3. Decentralized Exchanges:

• KWENTA: A platform for trading Synths.
• dHEDGE: Offers asset management, risk hedging, and copy trading services.
• PARASWAP: Allows the conversion of various Synths with Ethereum tokens.

Features of the Synthetix Project:

1. Creative and Safe Design:

• Implements a unique and creative idea, enabling transactions of valuable assets on the blockchain.
• Users predict asset prices without directly buying, fostering decentralized trading.
• Eliminates the need to trust brokers or financial institutions.

2. Support for Smart Contracts:

• Built as a second layer network on Ethereum, fully supporting smart contracts.
• Most actions and transactions on the network are executed based on smart contracts, ensuring the fulfillment of orders.

3. Reasonable Fees:

• Developed on Ethereum but changed the block verification algorithm to proof of stake.
• Reduced fees significantly and increased block approval speed.
• Transaction process on the platform is cost-effective.

4. Unique Supply and Demand Policy:

• People need to pledge 7.5 times the SNX digital currency to issue an asset.
• Promotes an increase in the amount of locked assets, ensuring demand slightly exceeds supply.
• Developers provide rewards for users pledging their property, paid through SNX currency.

In summary, the Synthetix network encompasses diverse sections, including assets, staking, and decentralized exchanges. The project stands out due to its creative design, robust support for smart contracts, reasonable fees, and a unique supply and demand policy that contributes to sustained growth.

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