Synthetix (SNX) is a DeFi protocol built on Ethereum, which issues synthetic assets. Their native token is Synthetix Network Token (SNX). To issue synthetic assets, the native token of Synthetix SNX must be locked in a contract. The synthetic assets represent the real-world assets on Synthetix Network and are known as synths.
So, what are the benefits of the collateral model that Synthetix follows for the issuance of synthetic assets? Well, it removes the need for any counterparties for conversion between synths. Instead, all conversions between synths are through smart contracts. Another benefit of this model is that it solves the infamous liquidity and slippage issues common on decentralized exchanges.
Now, let’s talk about what synths are and what type of synths are available for trading on Synthetix. As we said, synths mimic the real-world asset in terms of prices. As for the assets available for trading on Synthetix, it can be any real-world asset. It isn’t limited to cryptocurrencies alone. Currently, there are four types of assets available on Synthetix for trading. These are crypto, forex, equities, and commodities.
At the time of writing, there are 36 crypto synths available for trading on Synthetix, which includes sBTC, sETH, sBNB, sLTC, sLINK, sETS, sXMR, and more. As for forex, Synthetix supports trading of 7 synths, which includes sUSD, sJPY, sEUR, and more. Users can trade three equities on Synthetix: sFTE, sNIKKEI, and sTSLA. Commodities available for trading on Synthetix include sXAU, sXAG, sOIL, and iOIL.
Synthetix History
Synthetix (SNX) is the brainchild of Cain Warwick. He holds a BSC in Genetics from UNSW Sydney. Along with his involvement in Synthetix as a founder, he is also an advisory board member & investor in The Burger Collective, Founder & Non-Executive Director of Blueshyft, and Advisory Council Member of Blockchain Australia.
The first synth on Synthetix was released on June 11, 2018, and it was nUSD, a stablecoin. At the time of launch, this project wasn’t known as Synthetix. Instead, it was known as Havven. The name change took place in December of the same year. At that time Synthetix platform could support over 20 synths. Today, Synthetix has come a long way benefiting from the DeFi space growing at a rapid pace. It became one of the leading names and achieved tremendous growth within a couple of years. Now, Synthetix is one of the largest DeFi protocols with $1.66 billion worth of value locked.
What Problem Does Synthetix Solve?
The crucial problem that Synthetix (SNX) solves is that it makes it possible for users to gain exposure to assets that they wouldn’t have been able to otherwise. For instance, users who have no way to buy Tesla shares can, instead, go to Synthetix, collateralize SNX tokens, and receive sTSLA in return. In many places, it is very difficult for people to find a credible platform for trading real-world assets. It could be for multiple reasons, including regulatory challenges.
As Synthetix (SNX) is a DeFi platform, any user in the world with an internet connection and SNX tokens in their wallet can create synths, which mimic the prices of real-world assets like Gold, Silver, Bitcoin, Ethereum, Oil, and more. Many users may also prefer trading on Synthetix as it doesn’t require a user to complete the KYC process to trade on the platform, unlike the traditional financial platforms.
How Does Synthetix Work?
The most crucial part of Synthetix (SNX) is decentralized oracles, using which Synths track the prices of real-world assets. Decentralized oracles feed the price of real-world assets to Synthetix in real-time. Thus, holding synths is similar to owning real-world assets as they mimic the underlying assets.
Using decentralized protocols, Synthetix allows its users to trade a variety of assets, including gold and silver. The benefit of trading synths of gold, silver, and more on Synthetix is that you can trade them easily and benefit from holding the synthetic version of real-world assets without actually owning them.
Are you wondering if synths are tokenized assets? Actually, they are not! For instance, buying tokenized assets, which are backed by real-world assets like gold, gives you the right over the underlying assets, too. On the other hand, owning Synths does not mean you are the owner of any underlying asset that exists outside Synthetix Network. Instead, buying synths only gives you exposure to the respective asset without the ownership over the underlying asset.
Synthetix Tokens (SNX)
As we said in the beginning, Synthetix (SNX) wasn’t always known by that name. In its early days, the project began as Havven. It had also raised a sum of $30 million through ICO. The tokens were called Havven tokens back then, and their total supply was only 100 million. But in December 2018, Havven transformed and was relaunched as Synthetix. Now, its token was called Synthetix, and its total supply was 250 million.
As per the distribution schedule of SNX tokens, the total number of SNX tokens will be 175 million in March 2020. The supply of SNX tokens will increase every year from March thereon till 2024. The first increase will be in March 2021, when the number of SNX supply will touch 212.5 million from 175 million, which would mean a 21% increase. The next increase in the supply of SNX tokens will come in March 2022, with a growth rate of 9%. The total supply of SNX tokens will become 231.25 million in March 2022.
Conclusion
Synthetix (SNX) is reaping the benefits of being the first mover in the synthetic assets space. Considering that the global derivatives market is worth billions of dollars, Synthetix has a lot to gain in the coming days. There is no doubt that Synthetix is among the most complicated protocols in DeFi. But at the same time, it is one of the most innovative DeFi protocols. By bringing real-world assets onto the world of blockchain, Synthetix has truly connected the traditional financial industry with DeFi. Overall, the future seems bright for Synthetix.
