Synthetix is a decentralized asset collateralization protocol built on the Ethereum network. The project enables users to invest in traditional stocks like Apple shares using Ether or Bitcoin through synthetic assets called Synths. These Synths replicate the value of underlying assets—whether cryptocurrencies, fiat currencies, or commodities—without requiring direct ownership.
The SNX Token
The SNX token is the backbone of the Synthetix ecosystem. It serves as collateral to stabilize Synths, with a current collateralization ratio of 750%. SNX holders can stake their tokens to:
- Earn protocol fees.
- Receive weekly inflation rewards (currently 1.25% per week, reducing to 2.5% annually post-August 2023).
- Participate in governance decisions.
👉 Discover how to stake SNX for passive income
Services Offered by the Protocol
Synths
Synths are Ethereum-based tokens that track the value of real-world assets. Key features include:
- Diverse exposure: Trade synthetic versions of BTC (sBTC), gold (sXAU), or fiat currencies like the euro (sEUR).
- No liquidity constraints: Swap Synths instantly without order books via Synthetix.Exchange.
Synthetix.Exchange
This decentralized exchange (DEX) allows frictionless Synth trading with:
- 0.3% transaction fees, distributed to SNX stakers.
- Direct asset conversion: Destroy sUSD to mint sETH, eliminating counterparty risk.
How Do Synths Work?
- Collateralization: Users lock SNX (at 750% ratio) to mint Synths.
- Debt tracking: The protocol records minted Synths in a debt pool.
- Redemption: Burn Synths to reclaim SNX collateral.
Available Synths
- Cryptocurrencies: sBTC, sETH, sBNB.
- Fiat currencies: sUSD, sEUR, sJPY.
- Commodities: sXAU (gold), sXAG (silver).
Risks of Using Synths
- SNX volatility: Collateral value fluctuates with SNX price.
- No liquidation mechanism: Unlike MakerDAO, Synthetix relies on overcollateralization incentives.
👉 Explore Synthetix’s risk management strategies
Future of Synthetix
- Expanding assets: Adding synthetic stocks (e.g., Apple, Tesla) and indices (S&P 500).
- Multi-collateral support: Integrating ETH to enhance stability.
- DeFi partnerships: Collaborations to strengthen ecosystem interoperability.
FAQ
1. How do I buy SNX?
Purchase SNX on exchanges like Binance or Bitvavo. Staking rewards and airdrops offer additional earning opportunities.
2. What’s the SNX staking APY?
Currently ~65% annually (inflation-adjusted), tapering to 2.5% by 2025.
3. Can Synths lose peg?
Yes, but the 750% collateral ratio mitigates abrupt depegging risks.
4. Is Synthetix audited?
Yes, major smart contracts undergo third-party security audits.
5. How does Synthetix compare to Mirror Protocol?
Synthetix focuses on broader asset classes (including crypto and commodities), while Mirror specializes in stocks.
Final Thoughts
Synthetix pioneers decentralized derivatives with its Synth model. While risks exist, its innovative approach to synthetic assets positions it as a key DeFi player.