Synthetix (SNX) - one of the hottest cryptocurrency in the rapidly growing DeFi world.
What is Synthetix?
Synthetix - a Decentralized Finance or DeFi platform in the Ethereum blockchain with some functions:
First, it is a Decentralized Exchange or DEX. The benefit of a DEX is that users don't actually have to open an account with any central body. And because everything is under the rule of smart contracts, users will only be needing to connect thier wallet that is compatible with Ethereum network like Metamask.
Secondly, Synthetix is also a synthetic asset issuer. And the meaning of this is that platform users can make or create their own or original synthetic assets - and this is called as Synths.
Synths is an asset in the blockchain that are pegged in the physical world assets like cryptocurrencies, commodities and fiat currencies.
Their price is tracked in real-time using Chainlink oracle data feeds, allowing investors to buy, sell and trade on these assets like the real thing, only without a central body.
Synths that were minted in the platform will be denoted with an 's', for example; sBTC, sUSD, sTSLA, sAAPL, sAU (s-Gold).
Other indexes in the platform like sCEX that gives its traders or investors an exposure to a range of Centralized Exchange tokens like Kucoin shares and Binance Coin.
But while Synths like sAAPL give investors exposure to these real-world assets, it won't give Synth investors and the dividends that actual stockholders get.
What's more interesting is that users can also choose to bet the other way, and short prices with synthetic assets known as Inverse Synths.
Inverse Synths like iBTC for example, rise in price when the actual price of BTC falls. Other Inverse Synths available on the Synthetix Exchange are iETH and iBNB.
Lastly, Incentive staking mechanism - Incentive staking mechanism rewards users for staking SNX tokens to provide liquidity and stability to the ecosystem.
The SNX token
SNX coin is the utility token of the Synthetix ecosystem. Users purchase SNX token and lock it up as collateral to create Synths.
The first 100 million SNX tokens were released in March 2018, an amount that is set to be increased to even nearly 250 million in 2024. As of today, there are nearly 130 million of token in the circulation.
Minting SNX tokens
To mint Synths, users must first back the amount with a 750% collateralization ratio. This will mean that to mint a 1,000 sUSDT, for an example, you will be needing to deposit the equal amount of $7,500 in SNX tokens. This high ratio is actually required to act as a buffer against big market price swings, and maybe raised or lowered in the future.
If you will be minting Synths, you will also have a portion of the debt pool in the platform, that are representing the Synths' total value in the system. This means that your debt may increase or decrease, depending on the exchange rates and supply of Synths within the network.
To unlock your SNX and exit the system, you must pay back the debt by burning Synths equivalent to the amount owned.
Staking SNX tokens
SNX holders are incentivized to stake their tokens by earning both staking rewards and a proportion of exchanges trading fees.
For each trade in the platform, it will have an exchange fee of nearly 0.3%, that will then be sent to a pool for fees and then distributed again to stakers of SNX along with the earned staking rewards for every Wednesday.
Compared to other exchanges, Synthetix platform's benefit is that it will possibly gives its investors a infinite supply and liquidity, as new token will always be burned and minted.
My conclusion
Synthetix has the potential to synthesize every single asset in the world and lock up the equivalent value in the world of Decentralized Finance.
Images from : cryptobriefing.com
Article by: @Ryryry143
Tokens and cryptocurrencies might be different form each other, I am not. But otherwise I feel informed with this :) I am new and still learning.