Hey guys :) I’m back with another comprehensive Q&A piece, this time for one of the most popular and revolutionary Ethereum DeFi projects – Synthetix Network (SNX).
Synthetix Network is a protocol for trading synthetic assets on Ethereum. The project is known for its revolutionary tokenomics (token economics) and is ranked #2 in terms of locked USD value out of all DeFi projects on DeFi Pulse.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Synthetix Network?
- Who and When Created Synthetix Network?
- What is $SNX Used For?
- What exactly are Synthetic Assets?
- What are the products of Synthetix Network?
- Where to Store $SNX Tokens?
- Where to Buy & Sell Synthetix Network $SNX?
1. What is Synthetix Network?
Synthetix website homepage
Synthetix Network is a protocol for issuing and trading synthetic assets (Synths), which are known as derivatives in traditional markets.
In Synthetix, ‘Synths’ are ERC-20 token representations of crypto assets, stocks, fiat currencies, precious metals, and other forms of assets. These synthetic assets simply copy the price of an asset and leave behind all of its other properties. They are collateralized by the Synthetix Network Token (SNX) and are primarily used for trading on the Synthetix.Exchange.
Essentially, the Synthetix Network protocol brings a new flavor of decentralized exchange to the world of Ethereum's DeFi by offering three key differences relative to most other DEXes:
- Synthetix does not use order books and traders do not trade against any specific counterparty. Instead, traders trade against a decentralized pool of community provided collateral.
- Traders do not buy and sell real digital or physical assets. They buy and sell synthetic assets marked to market by off-chain oracles provided by Chainlink.
- Traders have native access to derivatives and investable baskets, rather than this being a secondary feature as seen in traditional exchanges and DEXes.
Overall, the Synthetix Network protocol is thought to be rather revolutionary. It has opened up people's minds about the possibilities of Ethereum DeFi and last year alone (2019), SNX gave early investors a near 4,000% return on investment (ROI).
2. Who and When Created Synthetix Network?
Synthetic founder, Kain Warwick
Synthetix Network was founded in 2017 by Kain Warwick as Havven and later rebranded to Synthetix Network in December 2018.
Back when Synthetix was called Havven, the platform was launched as a stablecoin project with its native cryptocurrency called Havven Token (HAV). During this time, the Havven protocol enabled the creation of a stablecoin asset called nUSD.
In launching their stablecoin, Havven understood that stablecoins would be a hot thing in crypto, but they soon realized and understood the immense potential of DeFi. That’s when the project rebranded from Havven to Synthetix in December 2018.
Getting back to Synthetix Network’s founder Kain Warwick, to this day, he maintains a leading role in the project but is also involved in other endeavors.
Apart from Synthetix, Warwick is also the co-founder and CEO of blueshyft, he’s an advisory council member of the Australian Digital Commerce Association, and he’s an investor and advisory board member of the Burger Collective.
That said, Warwick maintains many active roles in all of his endeavors and he’s not one to leave and abandon something that he started or is a part of.
Synthetic Network Token (SNX) Launch and Issuance
Synthetix Network launched its SNX token via an initial coin offering (ICO) in March 2018 with the issuance of 100,000,000 SNX.
Out of this 100K SNX total supply, the distribution is as follows:
- 60% - to investors in the Main Sale and the EOI Sale
- 3% - reserved for Bounties and Marketing Incentives
- 5% - reserved for Partnership Incentives
- 12% - to the foundation, vesting quarterly for 12 months
- 20% - to the team and advisors, vesting quarterly for 24 months
Following the ICO one year later in March 2019, Synthetic Network introduced a new monetary policy with an inflationary supply for 5 years to reward active stakers. The schedule is as follows:
As of June 2020, the total supply of Synthetix Network Token is 189,061,308 SNX and its circulating supply is 187,837,136 SNX.
3. What is $SNX Used For?
Synthetix Network Token (SNX) logo
Synthetix Network Token (SNX) is the native cryptocurrency of Synthetix and it acts as the foundation and backbone for the Synthetix Network.
The primary use case for SNX is for it to be locked up (staked) in a contract so that it’s used as collateral to back the issuance of synthetic assets (Synths). SNX holders are incentivized to stake their tokens as they are rewarded with a portion of the trading fees generated from the Synthetix.Exchange trading platform.
That said, the SNX token captures fees generated from the trading of the Synthetic assets that they back and this is where the SNX token value is derived from.
Trading on Synthetix.Exchange does not require the trader to hold SNX.
Staking SNX to be used as Collateral
All Synths are backed by SNX tokens with a current collateralization ratio of 650%, and this ratio can be raised or lowered in the future through community governance mechanisms.
When an SNX holder stakes their tokens as collateral, new SNX is minted via Mintr, a decentralized application for interacting with the Synthetix contracts. This newly minted SNX is then distributed to stakers as a reward, which is on top of the fees that stakers earn.
Rewarding stakers with SNX was simply introduced to incentivize SNX holders to participate in the network and the SNX rewards come from the protocol’s inflationary monetary policy.
4. What exactly are Synthetic Assets?
As the name suggests, they are ‘synthetic assets’ that track the price of an underlying “real” asset. In traditional markets, synthetic assets or Synths would be referred to as derivatives.
Synths can represent any kind of asset from crypto-assets, stocks, fiat currencies, precious metals, and other forms of assets. The purpose or idea behind synthetic assets is to provide investors and traders with exposure to various types of asset classes without ever requiring them to hold the underlying asset or trust a custodian.
As of June 2020, Synthetix Network supports synthetic assets for Crypto, Crypto Indexes, Forex, Equities, and Commodities, with support for Stocks coming soon.
Moreover, Synthetix Network currently features two types of synthetic assets: Regular Synths and Inverse Synths.
Regular Synths simply track the price of the underlying asset and have an “s” before the asset ticker. For example, sETH, sBTC, sUSD, etc.
These Synths, as well as Inverse Synths are assigned an exchange rate through high-quality price feeds supplied by trusted and secure Chainlink oracles.
As the name suggests, Inverse Synths inversely track the price of an asset, meaning that when the “real” asset price decreases, it’s Inverse Synth price increases. For example, when BTC’s price decreases, iBTC’s price increases. In other words, if you want to short Bitcoin with synths, you can buy iBTC for that purpose.
As seen in the example above, Inverse Synths are represented with an “i” before the asset ticker, ie. iETH, iBTC, iUSD, etc. Currently, Synthetix Network only supports Inverse Synths that track cryptocurrencies.
5. What are the products of Synthetix Network?
Synthetix Network has two main products being:
- Synthetix.Exchange (a DEX for trading synthetic assets ‘Synths’)
- Mintr (a dapp that allows SNX holders to mint and burn Synths)
The ability to trade synthetic assets is the core value proposition of Synthetix and Synthetix.Exchange is where all the trading happens.
Synthetix.Exchange provides traders with a unique trading experience on Ethereum with on-chain features you won’t find anywhere else:
Infinite Liquidity - There’s no orderbook, so you don’t need to worry about liquidity or slippage.
Peer-to-Contract Trading - Seamlessly exchange between a wide variety of synthetic assets.
Distributed Collateral Pool - Trade assets backed by a distributed pool of crypto collateral that’s censorship-resistant.
Mintr is a dapp for SNX holders that allows them to perform a variety of actions in the Synthetix Network including:
- Mint and burn Synths
- Manage their collateralization ratio
- Collect fees generated by circulating Synths
- Send sUSD to a selling queue
- View their balances and Mintr history
- Unlock escrowed SNX
- + more
Using Mintr is as easy as 1,2,3 as the dapp has a clean and intuitive interface:
- To start using Mintr, simply connect a wallet (ie. MetaMask, Trezor, Ledger, Coinbase, or another wallet through WalletConnect) containing SNX tokens.
- Next, click “Mint” and decide how much and what kind of Synth you would like to mint.
- Now, you can use your new Synth to trade, or stake remaining SNX, to claim a weekly reward.
6. Where to Store $SNX Tokens?
Synthetix Network Token (SNX) is a popular and well established ERC-20 token residing on top of the public Ethereum blockchain. That said, there are a multitude of good options available for securely storing your Synthetix Network (SNX) cryptocurrency.
- MyEtherWallet (MEW) (web)
- Ledger Nano S (hardware)
- Trust Wallet (mobile)
- Exodus Wallet (desktop, mobile)
- Atomic Wallet (desktop, mobile)
In addition to the above-listed wallets, Synthetix Network Token can be stored on a wide variety of other wallets supporting ERC-20 tokens. However, before you choose a wallet to store SNX, be mindful of the following features:
- In-Wallet token swaps - exchange SNX for other cryptos without leaving you wallet
- User control of private keys - not your keys, not your coins
- Active developer community - up-to-date maintenance
- Back up & security features - pin codes, seed phrase
- Good reviews - highly recommended
7. Where to Buy & Sell Synthetix Network $SNX?
Synthetic Network (SNX) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade Synthetix Network is through cryptocurrency exchanges.
You can buy SNX with cryptocurrency or fiat at the following top exchanges. In most cases, you will have to fund your account with fiat, buy Bitcoin or Ethereum, and then use BTC or ETH to buy Synthetix Network (symbol SNX).
- Kucoin - BTC, ETH, USDT
- Uniswap - ETH
- Kyber Network - ETH
- Liquid - BTC
In addition to the exchanges listed above, Synthetic Network (SNX) is also traded on a wide array of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.