Synthetix (SNX) project enables users to issue and trade synthetic decentralized assets and is built on the Ethereum network. Formerly known as Havven, SNX empowers the creation of on-chain synthetic assets that track the value of investments in the real world.
Synthetix is a decentralized asset insurance protocol that allows users to hold, mint, and trade a wide range of derivatives – commodities, fiat currencies, and even stocks. They can do this for certain cryptocurrencies, the most popular being BTC.
The Synths are collateralized through the Synthetix Network Token (SNX), driving value and liquidity to the underlying assets while offering increased accessibility to traditional financial assets and new trading strategies.
Remember that there are also binary options to purchase a position on a yes or no outcome over a pre-defined time frame. The Synthetix ecosystem can reward traders by providing them capital for different components of the Synthetix ecosystem.
The Synthetix Foundation, originally governed by Synthetix, was created in Australia as a not-for-profit foundation. In 2020 control was shifted to three autonomous decentralized firms (or DAOs).
Synthetix provides a wide range of crypto and non-crypto assets in a permissionless, decentralized, and censorship-resistant method – enabling participation in the DeFi ecosystem even if you do not hold any of these assets.
You can use multiple methods to start trading Synths. First – purchase ETH on an exchange, swap that ETH for sUSD on Kwenta, and then sell for other Synths such as sBTC.
The second method – is to obtain SNX tokens on an exchange, stake them on Mintr, and create synths while beginning to trade them on Kwenta.
All of the Synths on Synthetix created through staking SNX tokens are backed by 750% collateralization ratios determined by community governance (and may be subject to change). Stakers have to manually manage their balance on Mintr by minting sUSD if it is too high – or burning sUSD if it ends up being too low.
Through staking SNX and minting sUSD, customers are essentially taking on debt, which reflects the amount of sUSD that has to be burned to un-stake their SNX. In turn, it represents a part of all of the debt on Synthetix and is denominated in sUSDT, and that debt increases or decreases by the supply of Synths and their exchange rates.
Certain things make the Synthetix Network truly unique. Most notable is the ability for anyone to convert Synths without the need for a counterparty.
Any Synth can be traded for any other Synth on the Synthetix Exchange, and its functionality provides an almost infinite level of liquidity.
The Synthetix network offers peer-to-contract (P2C) trading, where the trades are executed easily and quickly without any order book. Responsible for providing this collateral on the platform and maintaining the entire exchange’s stability is distributed pool of token holders.
Synths can be in any form and are designated with a prefix of “s” – fiat synths look like sEUR, sUSD, and so on.
Users should not trade the same type of Synth that was created. As long as the Synth used for payment has the same market value, it will be accepted by the system.