Synthetix Review: Fake Assets or a Promising Niche?

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Synthetix is a decentralized liquidity layer that operates on both Ethereum and Optimism. Its principle is based on creating synthetic assets, which are pegged to the price of cryptocurrencies, fiat currencies, or even precious metals such as gold or silver.

Founders and investors ?

The Synthetix protocol was founded in 2017 by Cain Warwick, an Australian who previously worked as director of the Blueshift retail network. Originally named Havven, the project was renamed Synthetix after one year.

From 2017 to 2020, Synthetix raised $166 million from prominent venture capital funds such as Coinbase Ventures, Paradigm, IOSG, and Framework Ventures. In 2018, the SNX token was launched through an ICO on the TokenSoft platform, raising $5.3 million at a price of 67 cents per token.

How does Synthetix work? ⚙️

The pricing of Synthetix's synthetic assets (such as sBTC, sETH, sUSD, sEUR, XAU, and others) is determined by oracle networks, such as Chainlink and Pyth, which gather data from real markets. These assets are minted and burned through a system of smart contracts and collateralized by SNX tokens (with a surplus) that are sent to staking. Additionally, ETH and LUSD can be used for collateral as well.

What exactly is SNX?

SNX is the native token of the Synthetix protocol, providing fuel for its intricate machinery. By holding SNX, users can earn rewards by staking their tokens, receiving a portion of the platform's transaction fees. 

Additionally, SNX serves as a governance token, granting its holders voting rights in matters related to the protocol's operation.

Currently, 82% of the maximum supply of SNX tokens are in circulation as a result of the restricted emission of SNX tokens.

SNX is available on numerous centralized exchanges, including WhiteBIT, OKX, Binance, Huobi, Coinbase, Kraken, Bitfinex, and Kucoin.

To add SNX to Metamask, one must manually select the token import feature and paste the contract address provided below:

  • 0xc011a73ee8576fb46f5e1c5751ca3b9fe0af2a6f for Ethereum network;
  • 0x8700daec35af8ff88c16bdf0418774cb3d7599b4 for Optimism network.

Ecosystem ?

Several projects have been created based on the Synthetix protocol, including:

Kwenta and Decentrex — decentralized exchanges for spot and futures trading of synthetic assets;

Lyra — a platform for trading cryptocurrency options and collateralizing them with a liquidity pool.

Polynomial protocol — automates financial derivative strategies to create passive income products from diverse assets.

1inch and Curve — platforms for trading synthetic assets.
Synthetix protocol leveraged by these platforms Source:

Synthetix protocol leveraged by these platforms Source:

Future Prospects and Potential Risks ?

Synthetix's original vision transcended beyond cryptocurrencies, fiat currencies, and precious metals. It also included creating synthetic assets pegged to various companies' stock prices, which has yet to be realized. This could become a reality with the launch of the third protocol version, Synthetix V3, which promises to expand the variety of available markets.

As for the STX token, it's got a rock-solid foundation and enough potential to soar high in a bullish market. But before you go all-in, beware of the risks that come with the territory. Even the developers themselves have sounded the alarm, so proceed with caution!

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