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Synthetix is a blockchain-based platform enabling users to create, hold, and trade synthetic assets. These synthetic assets, also known as Synths, represent a wide range of derivatives, including commodities, fiat currencies, stocks, and cryptocurrencies.
The protocol uses smart contracts to provide a decentralized, trustless, and transparent way of handling them. The Synthetix Network Token backs the value and liquidity of these synthetic assets. SNX provides accessibility to traditional financial assets bringing new trading opportunities.
Synthetix is a DeFi platform built on the Ethereum blockchain. It allows users to create, trade and settle synthetic assets, which are digital assets that track the value of real-world assets such as stocks, commodities, and currencies.
These synthetic assets are called Synths, and they are created using a process called collateralization, where users provide collateral in the form of cryptocurrency to mint new synths.
The platform uses a DAO to govern synth issuance and to manage the collateral. This allows trustless, transparent and efficient trading of synthetic assets.
How does Synthetix work?
The Synthetix protocol allows the creation of synthetic assets, also known as “Synths”, which are similar to derivatives in traditional financial markets. These assets enable investors to gain returns from other assets without actually owning them. A wide range of assets can convert into Synths, including cryptocurrencies like BTC and ETH, fiat like U.S. Dollars, and commodities like silver and gold.
In simple terms, a blockchain oracle allows smart contracts to access external data that is not on their network, by providing them with a way to connect to external information. The Synthetix protocol utilizes decentralized price oracles to access the data of underlying assets, enabling users to own and trade synthetic assets, such as gold and silver, in a similar way to trading the actual assets. This increases accessibility to traditional financial assets and new trading strategies for crypto investors.
Synths, synthetic assets created on the Synthetix protocol, do not have a direct backing by the underlying asset they represent, unlike stablecoins which back themselves by an equal reserve of the currency they represent. Instead, the value of Synths derives from the collateralization that the Synthetix Network Token (SNX) provides. SNX is the native token of the platform that users must stake to mint a synthetic asset.
The Synthetix protocol operates on a principle of over-collateralization, meaning that any synthetic asset (Synth) created has backing by a fluctuating collateralization ratio. A governance process determines this ratio. The current collateralization ratio sits at 400%. Stakers are responsible for maintaining this ratio by minting more Synths if it gets too high, or burning them if it drops too low.
Kwenta is a decentralized exchange built on the Synthetix protocol. It allows users to trade Synths. They are synthetic assets collateralized through the Synthetix Network Token (SNX), with other users. Unlike traditional exchanges, Kwenta doesn’t employ an order book. Instead, trades execute directly with a smart contract on a peer-to-peer basis. A fee from 0.3 to 1% is charged on each trade, which is then used as a reward pool for network stakers.
Kwenta offers a variety of synthetic and inverse cryptocurrencies, as well as synthetic fiat currencies of the USD and Euro. Additionally, it offers two indexes, sDEFI and sCEX, which track a selection of decentralized finance assets and tokens issued by centralized exchanges, respectively.
Kain Warwick is a highly-regarded individual in the cryptocurrency industry. He founded and led the team behind the SNX project – a derivatives liquidity protocol built on Ethereum’s blockchain. He has an impressive background, having served as a non-executive director for Blueshyft – one of the largest digital payments platforms in Australia – as well as an Advisory Council Member for Blockchain Australia and an Advisory Board Member for The Burger Collective.
His team is equally esteemed, with CTO Justin Moses leading Synthetix’s technical development since its inception. Moses has a wealth of experience when it comes to large-scale systems. He formerly held the position of Director of Engineering at MongoDB. Senior Architect Clint Ennis is also part of the team, bringing with him 18 years of software engineering experience and a background in traditional finance from his days as an Architect Lead at JPMorgan Chase.
Synthetix network secured $30 million in 2018 through an Initial Coin Offering (ICO) and the sale of its native token SNX. The support of prominent crypto funds has enabled Synthetix to continue moving forward, with Warwick and his team at the helm. The project is a testament to Kain Warwick’s vision, expertise, and commitment towards creating a better future for digital assets.
In 2020, the governance structure of SNX transitioned from the Synthetix Foundation, a non-profit organization in Australia, to three decentralized autonomous organizations (DAOs). These include ProtocolDAO – managing funding for updates and changes to the protocol’s smart contracts, GrantsDAO – handling funding for community proposals for public goods, and SynthetixDAO – managing funding for entities working to advance the network’s development.
Frequently asked questions about SNX.
Who are the founders of SNX?
Kain Warwick, the founder of Synthetix, launched the network in September 2017 under the name Havven (HAV). After a year, the company rebranded to Synthetix. Warwick has a background in cryptocurrency and has worked on several other projects before founding Synthetix. He also established Pouncer, an Australian-exclusive live auction site and is a non-executive director at the blueshyft retail network.
How does Synthetix secure itself?
The SNX token, the native token of the Synthetix network, adheres to the ERC20 standard on the Ethereum blockchain. The network maintains its security through a proof-of-stake (PoS) consensus mechanism. Staking SNX tokens allows holders to earn returns from network fees and through the protocol’s inflationary monetary policy, known as staking rewards.
What makes SNX unique?
The Synthetix ecosystem enables users to trade and exchange synthetic assets, or “synths”, collateralized by the Synthetix Network Token (SNX). The platform aims to provide access to a wide range of underlying assets, such as commodities, fiat currencies, and stocks, without the need to physically hold them. Users can also participate in staking by holding SNX tokens. This allows them to earn a share of the transaction fees on the Synthetix decentralized exchange (DEX). The platform operates autonomously, providing users with a decentralized trading experience.
The Synthetix network utilizes smart contract-based price delivery protocols, known as oracles, to track the value of underlying assets. This allows for seamless trading of synthetic assets without liquidity or slippage issues, eliminating the need for third-party intermediaries. The platform uses the SNX token as collateral for the synthetic assets minted. The tokens are locked in a smart contract when synths are issued. As of recent, the protocol has moved to the Optimistic Ethereum mainnet to decrease network gas fees and improve latency.
Where do I buy SNX?
The easiest way of buying SNX is via the exchanges that trade it. The coin’s market cap and circulating supply determine the Synthetix price.
Highest price paid (all time high) for Synthetix in peak market sentiment was $28.77 on February 14th, 2021. The current price of SNX is trading at a 90% drop from all time highs.