Synthetix Network is a platform where you can trade cryptocurrency, DeFi, as well as any real-world asset imaginable. High collateral is used to reduce risk.
When you think of the name Synthetix, of course, you quickly think of synthetic or synthesis. A synthesis is an amalgamation of dissimilar things, creating a new product.
And that brings us to the heart of the purpose of cryptocurrency and Synthetix's platform: to merge various real-world or virtual-world products, allowing you to use one asset to invest in another. For example, you can buy the Synthetix Network token and use it as collateral for cryptos or other assets to earn a passive income.
By merging cryptocurrency and shares, for example, you get a synthetic product. Such a "crypto-share" is referred to as a "synth" on this platform. An example of this is sETH, a synthetic product composed of a synth and Ethereum, which we will discuss in depth later.
Synthetix is built on Ethereum and Optimistic Ethereum and is a decentralized trading platform for synthetic assets or assets. They also have their own DEX there for DeFi. You can trade in just about anything tradable there.
Kain Warwick could be called the most important person on their team. He, along with Peter McKean and Jordan Momtazi, founded Synthetix, then called HAVVEN.
Havven's white paper was written by Kain and in 2017 HAVVEN was founded. At a seed fundraise, they raised $250,000.
In 2018, their name was changed to Synthetix, which is understandable if you read this story, since it covers it.
Between 2018 and 2020, they worked hard to develop the concept, making it understandable that they needed money, because even Synthetix's developers don't work for free.
That same year, the ICO took place. But because they are so special they didn't think one ICO was enough and just did two. These raised a total of about $30 million.
Another venture sale followed in 2019 and 2020, raising $15 million.
In 2020, the foundation that supported the protocol was dissolved and they continued with 3 DAOs, which can find their own way by voting on the future through governance, making them a truly decentralized protocol.
Another ICO followed in 2023. What they mean by initial in this we don't know either, but anyway, it did raise another $20 million, so a knee-jerk reaction to this. Also, Synthetix V3 will arrive in this year.
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On Synthetix's platform, you can trade cryptocurrency, as well as oil, gold, stocks and other assets.
SNX is an ERC-20 token, so you need ETH to pay for gasfees.
To trade in assets that are not on a blockchain, you need synthetic tokens (Synths) here, which represent the underlying value of the synthetic assets.
So you can buy the derivative of gold, sXAU (i.e., the Synth of AU, synthetic gold), if you want a reasonably stable asset or if you are confident that the value of gold will only increase. So you cannot exchange this for real gold because a Synth is an "imaginary" or virtual asset, a representation of value of the underlying asset.
You used to have to go to gold dealers or an exchange to do this, but today you can just do it on a blockchain. So Synthetix is also a bridge between the physical world and the virtual of crypto.
If you think trading might collapse you can fall back on sEURO, the synthetic euro, which will always be worth a euro.
You can also make the more common trades here, such as in sBTC or sETH.
Types of Synths
There are different types of Synths, namely:
Cryptocurrencies, such as sETH, sBTC or sLINK.
Popular commodities, such as sXAU(gold) and sOIL(oil).
Foreign Exchange (Forex), where currencies are traded. Examples of the Synth are sEUR or sUSD.
Financial products such as stocks or derivatives.
Inverse Synths, such as iBTC.
The last Synth, the inverse Bitcoin, is a derivative that you actually go short with, which presents an interesting opportunity for people who don't feel like bothering. By buying iBTC or another inverse Synth, you are betting that the price of the underlying asset will fall. In this case, if Bitcoin goes down, iBTC goes up.
Synthetix is a decentralized liquidity layer on Ethereum and Optimism that houses the most popular DeFi protocols.
Stakers provide liquidity and receive a variety of rewards for doing so. A range of synthetic assets receive collateral in the process.
Synthetic assets and perpetual futures are hereby traded at oracle prices (real-time prices, generated by a program), making the traditional order book and counterparty unnecessary. The conventional slippage that usually occurs in this process is avoided by this mechanism.
Spot and perpetual Synth
Synthetix liquidity uses two types of synthetic assets:
Spot Synth. These hold real world assets by oracles, such as cryptocurrencies, commodities or fiat money, without the holders of these holding the underlying assets.
Perpetual futures. Perps is a decentralized perpetual futures exchange, using Synthetix liquidity as a counterparty for traders with deep liquidity and low fees. Stakers of Perp LPs (liquidity pairs) receive trading fees as rewards and guarantee the combined returns of all traders, ensuring market neutrality over time.
The SNX token has two functions, governance and staking. First, you need to buy Synthetix.
If you own SNX tokens and stake them you may vote on-chain once every 4 months on the future of this network.
There are several organizational components that have specific tasks. Councils are directly elected by SNX stakers, while other parts of the organization are appointed through existing governance procedures.
There are 4 Councils: the Spartan, Grants, Ambassador and Treasury Council.
Synthetix Improvement Proposals (SIPs) and Synthetix Configuration Change Proposals (SCCPs) are proposed by stakers through the DAO (decentralized autonomous organization), after which they are implemented and managed by Synthetix Core Contributors and the Core Contributor Committee.
All components work together to implement the direction indicated by the SNX stakers fairly and transparently.
It is safe to say that their DAOs are powerfully and effectively pieced together.
SNX is the ticker symbol of Synthetix Network.
Current max supply is around 315,000 (2023). Almost all of these crypto coins are already on the market, so there will be little dilution. There will be a small number of new coins entering the market to reward stakers and the like.
Total value locked into their ecosystem is quite competitive, which earned them a spot in CoinGecko's top 100.
There are quite a few platforms you can trade on through Synthetix, including:
On Kwenta, you can trade futures and options on Optimism. This decentralized derivatives platform lets you trade on-chain and real world assets.
Decentrex is used to invest in perpetuals (continuous), taking advantage of Synthetix's deep liquidity.
Lyra is an AMM (automated market maker) that allows traders to buy options on cryptocurrencies with a pool of liquidity as the counterparty.
Polynomial is a DeFi Options Vault (DOV) where you can create products using automated strategies for financial derivatives, such as options and perpetuals.
Chainlink is their partner when it comes to oracles for real time price setting.