Synthetix

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Discover Synthetix's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Synthetix?

Synthetix (SNX) is a decentralized finance (DeFi) protocol that allows users to mint and trade synthetic assets, known as Synths, which track and provide returns for various assets without requiring direct ownership. These assets include real-world currencies, commodities, cryptocurrencies, and indices. The protocol operates on the Ethereum blockchain and uses the Synthetix Network Token (SNX) as collateral for minting Synths.

How is Synthetix used?

Synthetix (SNX) is a protocol that enables the issuance of synthetic assets on the Ethereum blockchain. These synthetic assets, known as Synths, track and provide returns for another asset without requiring users to hold that asset. Synthetix supports various types of Synths, including commodities like gold and silver, cryptocurrencies, inverse cryptocurrencies, cryptocurrency indexes, and fiat currencies.

Key Uses of Synthetix
  1. Minting Synthetic Assets: Users can mint Synths by staking SNX tokens on the Synthetix platform. This process creates liquidity for trading Synths and supports the protocols that rely on Synthetix.

  2. Staking and Collateralization: SNX tokens are used for staking on the Synthetix platform. Stakers must manage their collateralization ratio manually, which is determined through community governance. The current collateralization ratio is 600%.

  3. Trading on Kwenta: Synths can be traded on Kwenta, Synthetix’s decentralized exchange (DEX). Users can purchase ether (ETH), exchange it for sUSD on Kwenta, and then exchange sUSD for other Synths like sBTC.

  1. Providing Liquidity: Synthetix provides liquidity to platforms offering crypto derivatives trading. This is achieved through the staking of SNX tokens, which supports the protocols that rely on Synthetix.

  2. Governance: The SNX token is used for governance purposes within the Synthetix ecosystem.

  3. Token Economics: The SNX token is subject to a goal of 20% inflation per year, with new tokens created to reward stakers for their service to the ecosystem.

Overall, Synthetix (SNX) plays a crucial role in creating a more mature financial market by facilitating price discovery and hedging against volatility through its synthetic assets and staking mechanism.

How do I store Synthetix?

To store Synthetix (SNX) tokens, you have several options:

  1. KuCoin Account: You can store your SNX tokens in your KuCoin account, which provides quick access to trading products like spot and futures trading, staking, and lending. KuCoin serves as the custodian of your crypto assets, ensuring security and convenience.

  2. Non-Custodial Wallets: For greater control and security, you can withdraw your SNX tokens to a non-custodial wallet. This option grants you complete control over your private keys, but you must store them securely to avoid losing access to your tokens.

  3. Hardware Wallets: Hardware wallets like Ledger or Trezor offer the most secure offline storage and backup. They are ideal for experienced users with large amounts of SNX tokens to store.

  1. Software Wallets: Software wallets, which can be downloaded to your smartphone or computer, are more convenient for making transactions but less secure than hardware wallets. They are suitable for inexperienced users with smaller amounts of SNX tokens.

  2. Online Wallets: Online wallets or exchanges, known as hot wallets, can be accessed with a web browser. They are less secure than other options and require users to trust the platform to manage their SNX tokens. They are best for users holding small amounts of SNX tokens or making frequent trades.

  3. AlphaWallet: AlphaWallet is another option that allows you to store, send, and manage your Synthetix tokens securely.

Each option has its pros and cons, so choose the one that best fits your needs and preferences.

How to buy Synthetix?

To buy Synthetix (SNX) tokens, follow these steps:

  1. Create an Account:

    • On Kraken, create a free account and connect a funding method to buy SNX.
    • On Binance, register via the website or app, and verify your identification.
    • On Coinbase, sign up or download the app and start the sign-up process, which includes verifying your ID.
    • On Pionex, register a free account on the website or app and pass the KYC verification.
    • On Ledger, buy a Ledger hardware wallet and create a Synthetix-Network-Token account on Ledger Live.
  2. Add a Payment Method:

    • On Binance, you can use credit cards, debit cards, bank deposits, or third-party payment channels.
    • On Coinbase, connect a payment method such as a bank account, debit card, or wire transfer.
    • On Pionex, choose from credit card, debit card, bank wire, or ACH transfer (for US citizens).
    • On Ledger, buy SNX directly on the Ledger app using a credit card or bank transfer.
  3. Select Synthetix:

  • On Binance, select Synthetix and USD from the dropdown menu.
  • On Coinbase, search for Synthetix Network Token and select it from the list of assets.
  • On Pionex, choose Synthetix from the available options.
  • On Ledger, select Synthetix-Network-Token on the Ledger Live app.
  1. Enter the Amount:

    • On Binance, enter the amount you want to buy and confirm the order.
    • On Coinbase, input the amount you want to spend in your local currency, and the app will convert it to SNX.
    • On Pionex, enter the amount of Synthetix you want to buy.
    • On Ledger, enter the amount you want to buy and complete the transaction.
  2. Finalize the Purchase:

    • On Binance, confirm your order and store or use your SNX.
    • On Coinbase, review and confirm your purchase.
    • On Pionex, complete the transaction and receive your SNX.
    • On Ledger, your SNX will be automatically sent to your hardware wallet and secured.

Remember to carefully consider your investment decisions and understand the associated risks before buying Synthetix tokens.

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History of Synthetix

Synthetix, originally known as Havven, was founded by Kain Warwick in 2017. The project initially aimed to create cryptocurrencies that mimicked the performance of cash, such as the U.S. dollar or the euro, on the blockchain. In late 2018, Havven rebranded as Synthetix, expanding its objectives to include synthetic assets for cryptocurrencies and commodities.

Synthetix raised $30 million during an initial coin offering (ICO) in 2018 and has since undergone multiple private funding rounds, including one in March 2023 that raised $20 million from Singapore-based DWF Labs. The project has evolved significantly, shifting its governance structure from the Synthetix Foundation to three decentralized autonomous organizations (DAOs) in 2020.

Synthetix has also made significant technological advancements, including its move to the Optimism layer 2 scaling solution, which significantly reduced gas prices and improved scalability. The protocol has grown to become one of the oldest DeFi platforms with a decentralized governance structure, offering a wide range of synthetic assets and derivatives trading opportunities.

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How Synthetix works

Synthetix (SNX) is a decentralized financial (DeFi) platform that allows users to create and trade synthetic assets, known as Synths, on the Ethereum blockchain. These Synths track the value of real-world assets such as fiat currencies, commodities, stocks, and cryptocurrencies without requiring users to hold the underlying assets themselves.

Key Components
  1. Synthetix Protocol: The core of the Synthetix ecosystem, which uses smart contracts to enable the creation, trading, and settlement of synthetic assets.

  2. Oracles: Decentralized price feeds that provide real-time prices of the underlying assets, ensuring that Synths are accurately priced.

  3. Synths: The synthetic assets created on the platform, which have prefixes like sUSD, sEUR, sJPY, etc., depending on the assets they represent.

  1. Collateralization Ratio: The ratio between the value of the Synths a user holds and the value of the deposited SNX tokens. This ratio is crucial to prevent users from taking excessive risks and ensures that there is enough collateral to back the Synths.

  2. SNX Token: The native cryptocurrency of the Synthetix ecosystem, used as collateral to create and trade synthetic assets and as a reward for users staking SNX tokens.

  3. Staking: Synthetix uses a Proof of Stake consensus algorithm, where users can stake SNX tokens to participate in staking and are rewarded with SNX tokens for their contributions to the network.

How It Works

To begin trading Synths, users can either purchase ether (ETH) and exchange it for sUSD on Kwenta, or obtain SNX tokens and stake them on Mintr, a decentralized application (dApp) created by Synthetix. Once staked, users can mint Synths and begin trading them on Kwenta.

The process involves:

  • Staking SNX: Users stake SNX tokens on Mintr, which are then used as collateral to create Synths.
  • Minting Synths: Users can mint Synths by depositing SNX tokens into the protocol. For example, depositing SNX can mint sUSD, a synthetic stablecoin linked to the U.S. dollar.
  • Trading Synths: Synths can be traded on decentralized exchanges like Kwenta, allowing users to gain exposure to various asset classes without owning the assets themselves.
Incentives and Rewards
  • Staking Rewards: Users who stake SNX tokens are rewarded with a portion of the transaction fees generated by the platform and additional SNX tokens as an incentive to increase Synths' liquidity.
  • Inflation: The Synthetix protocol has a goal of 20% inflation per year, with new tokens created to reward stakers for their service to the ecosystem.

Overall, Synthetix provides a decentralized infrastructure for creating and trading synthetic assets, offering users a way to diversify their portfolios and gain exposure to various asset classes without the need for intermediaries.

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Synthetix's strengths

Synthetix (SNX) has several strengths that contribute to its success:

  1. Wide Asset Exposure: Synthetix allows users to trade a wide range of synthetic assets, including cryptocurrencies, real-world assets like gold and silver, fiat currencies, and indices, without requiring them to own the underlying assets.

  2. Decentralized Governance: The protocol is highly decentralized, with no single point of failure or control. Governance is distributed among three DAOs, ensuring greater security and transparency for users.

  3. Passive Income: The SNX token offers legitimate utility within the platform, as users can earn a passive income by staking SNX tokens. This income is generated from transaction fees distributed to holders.

  1. Tokenomics: The tokenomic model incentivizes users to stake their SNX tokens, which decreases the supply and can push the price up due to demand. Additionally, when the price of SNX increases, the protocol unlocks the equivalent value of tokens, further rewarding stakers.

  2. First-Mover Advantage: Synthetix enjoys a first-mover advantage over newer entrants in the DeFi space, which has helped it establish a strong user base and attract significant investment.

  3. Community Engagement: The protocol has a strong community that actively participates in governance and decision-making, ensuring that the platform is constantly evolving to meet user needs.

  1. Compatibility and Integration: Synthetix is built on the Ethereum blockchain and uses the ERC-20 token standard, making it compatible with other DeFi platforms and allowing for seamless integration.

These strengths have contributed to Synthetix's success and its ability to attract users and investors in the DeFi space.

Synthetix's risks

Synthetix (SNX) carries several risks that investors should be aware of. These include:

  • Smart Contract Bugs: Synthetic assets are built on smart contracts, which are vulnerable to bugs and security risks. This can lead to potential losses for investors.
  • Volatility Risk: SNX tokens, like other crypto assets, are subject to significant price fluctuations, which can result in losses for investors.
  • Liquidity Risk: The liquidity of SNX tokens can be a concern, as it may be difficult to sell or exchange them quickly and at a fair price.
  • Counterparty Risk: Although Synthetix mitigates counterparty risks through its collateralization model, there is still a risk that the collateral may not be sufficient to cover the value of the synthetic assets.
  • Regulatory Risks: As a decentralized platform, Synthetix may be subject to changing regulatory environments, which can impact its operations and the value of SNX tokens.
  • Community Governance Risks: Synthetix relies on community governance to determine key parameters such as the collateralization ratio. This can lead to potential conflicts and risks if the governance process is not effective.

These risks highlight the importance of careful consideration and thorough research before investing in Synthetix (SNX).

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Did Synthetix raise funds?

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Synthetix’s team

  • Kain Warwick: Founder of Synthetix, previously involved in building cryptocurrency payment platforms in Australia and an Advisory Council Member in Blockchain Australia.
  • Justin Moses: Chief Technology Officer (CTO) at Synthetix, with extensive experience in large-scale systems and previously Director of Engineering at MongoDB.
  • Clinton Ennis: Senior Architect at Synthetix, with over 18 years of experience in software engineering and previously an Architect Lead at JPMorgan Chase.
  • Jordan Momtazi: Chief Operating Officer (COO) at Synthetix.

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