Synthetix is a protocol that mints synthetic representations of real-world commodities and assets to allow them to be exposed to the blockchain economy. It also allows for synthetic creations of entire crypto indexes, inverse cryptocurrencies and even standard fiat currencies. This allows large off-chain asset pools used by large institutions to be deployed and put to work. The creation of synthetic commodities plays a large role in markets becoming mature and compounding growth in new market spaces.
How Does SNX Work?
SNX is the network’s native token. In order to mint synthetic assets, users must buy and deposit SNX into the protocol and lock it. Once staked, users can use the Mintr dApp to generate the synthetic tokens required. They are issued as debt which is repaid to claim the SNX which has been staked. The most commonly derived asset is a stablecoin, sUSD, but it offers a range of, including gold (sXAU) and other synthetic cryptos like ETH. Note that unlike other commodity cryptos like PAXG, you don’t own any underlying gold, just the promissory note from the protocol itself.
These synthetic tokens can then be swapped on-chain against one another on the decentralized exchange Kwenta, and thus enact a blockchain version of real-world trading of these commodities. Yet they can also be deployed wherever the synthetic tokens are listed by another protocol. As it’s an Ethereum protocol, and the synths are ERC-20 tokens, then any DeFi application in the Ethereum space can support their use. This means real-world assets can be used to provide liquidity and can be deployed on protocols like Uniswap, Curve or Balancer.
Synths are not cheap. 750% of a desired synthetic asset’s price must be staked as collateral for the debt. The justification for this is so the protocol is extremely liquid and can withstand even devastating market shocks and keep the value of the synthetic asset safely pegged to the real world one. SNX’s twin challenges are stability of its tokens and their wider recognition and use in the wider blockchain economy, and the large collateralization ratio helps solve both.
There’s a further challenge, if Ethereum doubles in price, then each sETH (its synthetic token) would be worth more, increasing the debt owed by the protocol and its holders. To reward the stakers for providing stability of this protocol, stakers whose collateralization ratio stays high receives rewards, both in interest paid in SNX and all fees from the trades on the Kwenta Exchange. Stakers also have a role in community governance. The interest is paid from the growing supply of SNX tokens, which will reach 250 million over the next five years.
The Purpose of Synthetix
This is important, as its not casual users that SNX is aiming for. It wants companies and institutions with vast asset reserves a safe, secure way of deploying their assets on-chain and maturing the financial space within the blockchain through use of the derivatives that can be constructed through its synths. Current indexes that have been created include sDEFI, with a range of DeFi assets included, and sCEX, which tracks centralized exchange tokens. These were chosen by holders of SNX, and are examples of community governance voting that help direct the direction of the protocol.
Synth uses decentralized oracles from Chainlink to source the correct prices for its synthetic assets. Ultimately, it plans to offer stocks like Apple, Microsoft and Intel on its Ethereum-based protocol. This market maturation and ability for further webs of derivatives to be built will lead to insane growth as more of the world’s economy can be derived, traded and executed on-chain.
Is SNX Hard to Get?
If you are new to the world of digital assets then getting cryptocurrencies can be a confusing prospect. It may be a bit simpler with the top two Bitcoin or Ethereum, but what about that lesser known Ethereum token, such as SNX, that you have heard so much about?
Numio is a great choice for SNX. With Numio you can send and receive your stored SNX instantly and at the touch of a button. If you want to try something a bit more advanced you can use Numio to trade and swap SNX.
Download Numio to get Synthetix
How can I get SNX?
Getting SNX is easy on Numio. You can use your credit or debit card to purchase SNX, you can swap or trade it for other ERC-20 tokens (up to 100x cheaper than other wallets), and you can send or receive it as a payment. Whatever way you choose you can be sure that you are always in full control of your SNX.