Trading Synthetic Assets on Ethereum (ETH) With Ease.
Synthetix Network (SNX) Fact Sheet
- Synthetix (SNX) is a protocol that was specifically created as a means of enabling the issuance of synthetic assets on top of the Ethereum (ETH) blockchain network.
- Synthetix also supports any synthetic commodity, such as gold, or silver, or even synthetic cryptocurrencies, inverse cryptocurrencies, indexes, and FIAT currencies which are also synthetic.
- The platform aims to enable non-blockchain-based assets to be exposed throughout the crypto ecosystem and, as a result, create a broader, inclusive financial market.
- SNX is the native cryptocurrency used to earn exchange fees for the procedure of collateralizing the protocol, and they can be staked.
- Within the Synthetix protocol, collateralized assets get combined together as a means of filling the role as a counterparty debt pool to all of the mined assets, and allows users to trade synthetic assets directly, without any requirement for direct counterparties, while also solving any issues that might arise in terms of liquidity and slippage.
SNX Historical Data Price Chart in the U.S. Dollars (USD)
Synthetix Network (SNX) Historical Data Price Chart in the U.S. Dollars (USD). Source: TradingView
What is Synthetix Network (SNX)?
Synthetic assets, which are referred to as synths for short, are a combination of cryptocurrencies as well as traditional derivative assets. They are tokenized derivatives and have gathered a high level of popularity within decentralized finance (DeFi). This means that users are able to issue a variety of different synthetic assets by leveraging the power of Synthetix.
Now, within the sphere of the crypto space and within this protocol, synthetic assets are categorized as financial instruments that come in the form of ERC-20 smart contracts and are dubbed Synths.
These synths have the ability to track and provide the returns of another asset without requiring that anyone holds the asset in question. Anyone can trade them, and this ranges from cryptocurrencies, indexes, inverses, and real-world assets such as gold which have been turned into synthetic assets; this can be achieved on Kwenta, which is a decentralized exchange (DEX) that is powered by Synthetix.
Then there’s the native cryptocurrency that powers all of this, known as the Synthetix Network Token (SNX) which is utilized to provide collateral against any Synths which have been issued.
This mechanism essentially allows Synthetix to support instantaneous, as well as near-frictionless conversion between different Synths, all without any liquidity and slippage issues that are experienced by other decentralized exchanges. As such, the network of tokens supports an extensive set of use cases, such as trading, loans, payments, remittance, and much more.
To truly understand how all of this works, we need to go over the Synthetix Network and the utility of the Synthetix Network Token (SNX).
How is Synthetix Network (SNX) Used?
The main way through which the Synthetix Network works is by leveraging Synths. Synths are decentralized oracles. They are essentially smart contract-based protocols aimed at price discovery, and their main responsibility entails tracking the value of the assets that are represented, which in turn allows any user to hold and exchange Synths as they would actually gain exposure to the asset in question.
Through this unique system, these Synths essentially provide exposure to assets that would normally be inaccessible to the average cryptocurrency investor and lets anyone, from anywhere in the world, trade them both quickly as well as efficiently in terms of the cost associated with doing so.
Synths differentiate themselves when compared to tokenized commodities. For example, whenever someone owns a Synthetic asset, they do not own the underlying asset but are exposed to the price of that specific asset.
Due to the fact that these Synths, as we previously mentioned, are issued on top of the Ethereum blockchain, what this essentially means is that they are provided with a high level of flexibility as they can be deposited onto other decentralized finance (DeFi) platforms, including Uniswap, and Curve, and can be utilized as a means of providing liquidity on top of them, which allow users to earn interest on the synthetic assets that they own.
We know now that the primary use case for Synthetix is the creation of tokens that can track the price of different assets.
However, there are also numerous types of assets that Synth tokens can track, and these include FIAT currencies, Commodities, Cryptocurrencies, Crypto Indexes, and Inverse cryptocurrencies.
Use-Cases of Synthetix Network (SNX)
Now that we have a deeper level of understanding as to how the Synthetix Network actually works, we can go over some of its use cases.
On the Synthetix Network, any Synths that are created through the procedure of staking the native cryptocurrency, known as SNX, are backed by a 600% collateralization ratio. This is determined through community governance.
What this means is that stakers have to manage their ratio manually by minting sUSD if it's high, or burning it if it's low.
Whenever someone manages to stake SNX, after which they mint sUSD, what they are essentially doing is taking a debt that reflects the amount of sUSD that has to be burned in order to eventually un-stake the SNX in question. This is a direct indication of a proportion of all of the debt on Synthetix, which is denominated in the form of sUSD, and it can increase or decrease based on the supply of Synths and their exchange rates.
Whenever someone stakes their tokens, they are provided with the opportunity to earn two types of rewards if their collateralization ratio manages to maintain 600%.
These include staking rewards in the form of SNX, and exchange fees of all of the Synth trades which are denominated in the form of sUSD.
Then there’s another use case in the form of Kwenta. Kwenta is a decentralized exchange that enables users access to trading commodities, forex, crypto as well as more with up to 25x leverage and deep liquidity, without the risk of the assets becoming frozen at any point in time.
However, Kwenta is also a cryptocurrency exchange where users can trade Synths. Unlike other DEXs in the crypto space, this one specifically does not feature an order book and utilizes peer-to-contract trading instead.
Synthetix also offers peer-to-contract (P2C) trading, where the trades are executed quickly without an order book. A distributed pool of token holders is responsible for providing collateral on the platform and maintaining its stability.
What this essentially means is that all of the trades get executed against a smart contract. Here, another technology known as Chainlink oracles is utilized to provide the price feeds, which are then used to set an exchange rate for every asset. A variable fee occurs on each trade and gets sent to a pool where it can be claimed by those staking the SNX cryptocurrency.
Another differentiating feature that makes the Synthetix Network Token (SNX) unique is the fact that anyone can convert Synths without needing a counterparty, and any Synth can then be traded for any other Synths on the exchange. This provides almost infinite liquidity.
Usability & Primary Features of Synthetix Network (SNX)
The Synthetix Network was originally governed by the Synthetix Foundation, which was a not-for-profit Foundation based in Australia. However, it is now decommissioned.
However, today, the control has been given to three decentralized autonomous organizations (DAO).
- ProtocolDAO - this DAO is responsible for the process of funding the protocol upgrades as well as for any of the changes to the Smart Contracts.
- GrantsDAO - this DAO is responsible for the community proposals for the public goods on Synthetix.
- SynthetixDAO - this DAO is responsible for controlling the funding that occurs for entities that are advancing the network’s development.
The main way through which the protocol works is by leveraging the power of SNX and Synths. To generate Synths, a user has to acquire SNX, after which they need to deposit it on top of the Synthetix Platform.
In return for doing so, Syntehtix creates a new synth token that the user picks.
The SNX token is compatible with Ethereum's ERC-20 token standard, and the Synthetix network itself is secured through the Proof-of-Stake (PoS) consensus mechanism. Synthetix holders essentially stake their SNX, after which they earn rewards from the network fees.
Another way through which SNX stakers earn rewards is by leveraging the protocol’s inflationary monetary policy, known as staking rewards.
Given the fact that Syntthetix ran on top of Ethereum and was purpose-built for it, it does have support for smart contracts. The Synthetix contract communicates with synths as a means of managing their supply, as well as with the fee pool to remit the fees when synth exchanges end up occurring.
Tokenomics & Supply Distribution
When we look at the supply distribution of the SNX cryptocurrency, out of the total token supply, we see the following split:
- 0.87% went to the Pre-Sale
- 19.20% went to the Private Sale
- 3.05% went to the Public Sale
- 18.49% went to the Team
- 0.77% went to the advisors
- 4.62% went to the foundation
- 1.93% went to the partnership incentives
- 1.16% went to the bounties and airdrop
- 49.92% went to staking
Team & History
There are numerous team members that made Synthetix a reality.
Kain Warwick is the original founder of Synthetix and previously had experience in building
cryptocurrency payment platforms throughout Australia, such as Blueshyft.
However, there are other members of the development team, including:
- Justin Moses - CTO (Chief Technology Officer)
- Jordan Momtazi - COO (Chief Operating Officer)
- Clinton Ennis - Engineering Lead
- Jackson Chan - Blockchain Engineer
- Clement Balestrat - Full Stack Developer
- Evgeny Boxer - Frontend Engineer
- Zoe Archer - UX Designer and Frontend Engineer
- Anton Jurisevic - Blockchain Engineer
- Garth Travers - Communications Manager
- Andrew Trudel - Product Marketing & Community Growth
When we look at the history behind the project, the protocol originally began under the name Havven, and here it raised $30 million after it sold 60 million HAV tokens, which occurred in 2018.
The main goal behind Havven was to create cryptocurrencies that were able to mimic the performance of cash such as the U.S. dollar or the Euro on multiple blockchains.
Activities & Community
When we go over the community surrounding the Synthetix project, we can see that it has one of the largest members on the Official Synthetix Discord Channel, with over 46,000 people in total.
When we take a look at the Official Synthetix Twitter page, we can see that there are over 215,900 followers in total.
This represents that there is a large clear community behind the project, which is enthusiastic about it and extremely active.
Development Activity and GitHub Repositories
In order for us to get a better perspective surrounding the overall development activity, we will be going over the GitHub repositories.
Based on the Official Synthetix - Crypto-backed synthetic asset platform GitHub Page, we can see that there are 89 repositories as well as eight projects.
However, out of them, a total of five are pinned, including:
- Synthetix - Synthetix Solidity smart contracts
- Synpress - Synpress is a wrapper surrounding Cynpress.io, with MetaMask support due to puppeteer.
- SIPs - The Synthetix Improvement Proposal Repository
- Js-monorepo - The Standard JS conventions and utilities for working with Synthetix.
- Staking - a decentralized application (dApp) utilized for minting, burning, and earning on top of the Synthetix Protocol.
When we look at data from Ethersscan, we can see that there are 1,662,978 transfers, out of 88,830 holders of the cryptocurrency, with a cost of $2.88 per SNX and a fully diluted market cap of $853,297,202.99, and a circulating supply market cap of $681,429,950.
When we look at data from Cryptorank, we can see that the SNX cryptocurrency is trading at a value of $2.89.
Here, data showcases that there were 44,278,599 token transfers, with a transfer count of 5,784.
There were 1,098 unique senders, and there was a 799.70 median received amount, from 1,226 unique receivers.
According to data from DeFi Pulse, Synthetix Network has $170.936 million in Total Value Locked (TVL) as of September 7, 2022.
Source: DeFi Pulse
Activities and Partners
- Furucombo and Synthetix Cooperation - a collaboration that focused on the integration with Synthetix v3, an SNX staking mechanism to bring additional empowerment to tokenized debt swap strategy just like those collateral-debt position swapping strategies on Furucombo.
- Synthetix partnered with THORChain - Synthetix established a partnership with THORChain, a cross-chain liquidity protocol that enables lightning-quick fast, and low-fee swaps of crypto assets, powered by users staking its native token, RUNE.
- The Synthetix Ecosystem on Optimism - The Synthetix Ecosystem on Optimism includes protocols such as Lyra, Kwenta, Dhedge, Aelin, Polynomial, and others.
References & Reports
- Official Synthetix Discord Channel
- Official Synthetix Twitter
- Official Synthetix - Crypto-backed synthetic asset platform GitHub Page
- Synthetix System Documentation
- Synthetix Network Token Whitepaper
- Announcing Furucombo and Synthetix Cooperation - Medium
- Synthetix partners with THORChain - Synthetix Blog
- A dive into the Synthetix Ecosystem on Optimism - Synthetix Blog
- SmartCompany Source
- DeFi project Synthetix raises $3.8M from Framework Ventures - Blockworks
- Framework Ventures backs Synthetix - Synthetix Blog
- Decentralized Finance (DeFi) Definition - Investopedia
- Ethereum - Investopedia
- ERC-20 - Investopedia
- What Is a DEX (Decentralized Exchange)? - Chainlink
- Synthetic - Investopedia
- Bitcoin: A Peer-to-Peer Electronic Cash System
- Ethereum Whitepaper
- DeFi Indexes
- Synthetix Foundation Decommissioned - The transition from the Synthetix Foundation to 3 distinct DAOs
- What Is a Blockchain Oracle? - Chainlink
- Proof-of-Stake (PoS) - Investopedia