Hello Publish0x community and welcome back in this new article of my “Easy & Short Cryptocurrencies Made Accessible” area. This Sunday we are going to introduce Synthetix Network!
Have you ever heard of this cryptocurrency?
Before we start talking about Synthetix, let's recap what is DeFi and the traditional system.
You must know that prior to Bitcoin a centralized system with a managing single figure (company) on top was the traditional scenario. With the advent of Bitcoin and the Blockchain, a new system has been created that today we define decentralized. This system does not have a single figure at its head but multiple figures (people) who control everything.
Thanks to the blockchain, a process ecosystem has begun to be developed that uses this technology to overcome the problems that centralized systems have. From here the concept of smart contract developed which, thanks to Ethereum-like platforms, the DeFi was built.
Image source: https://www.coinmama.com/blog/defi-explained/
This sector is a derivative of centralized finance (CeFi) but with a very important change which is represented by the blockchain. That is, an economic system, distributed and within everyone's reach where a traditional system would never have arrived. It is from here that the Synthetix project was born and from here that, a finance that will change our lifestyle, is being developed.
Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. These synthetic assets are collateralized by the Synthetix Network Token (SNX) which, when locked in the contract, enables the issuance of synthetic assets (Synths). This pooled collateral model enables users to perform conversions between Synths directly with the smart contract, avoiding the need for counterparties.
This mechanism solves the liquidity and slippage issues experienced by DEX’s. Synthetix currently supports synthetic fiat currencies, cryptocurrencies and commodities like gold and silver. SNX holders are incentivized to stake their tokens as they are paid a pro-rata portion of the fees generated through activity on Synthetix.Exchange, based on their contribution to the network. It is the right to participate in the network and capture fees generated from Synth exchanges, from which the value of the SNX token is derived. Trading on Synthetix.Exchange does not require the trader to hold SNX.
With Synthetix is possible also to do staking. If you are following me since a few time you know that I’ve already talked about staking in different articles and probably you’re already earning money from this kind of passive income.
If you are new or have you missed my video tutorial for Tron (TRX) staking you can read one of my best successful articles here: https://www.publish0x.com/smart-crypto-investing/passive-income-with-trx-staking-xgdeomw
And check the Youtube video at this link: https://www.youtube.com/watch?v=aSTsWK3oTJU&feature=youtu.be
Synthetix Network uses a very complex system in operation. Through Staking it is possible to give, with the SNX token, the liquidity to the system that will be used to maintain the derivatives. When a derivative is generated, in this case the opposite of Bitcoin that is iBtc, a contract is created opposite to the rise of BTC. This is possible with the debt function, i.e. one party generates a debt and creates the contract that will hold it because it believes that Bitcoin will go down in the future.
Image source: https://synthetix.io
In the meantime, the contract has generated a debt that will be covered by a liquidity pool that will be offered by those who will stake the SNX. This process is the same as all contract types that are generated on Synthetix. That is why the system will incentivize a party to stake SNXs because it will offer them a reward. But this reward will have to be redeemed manually every week and in exchange for a very substantial fee. In fact, Synthetix staking is a process not for everyone but above all very expensive which will require a lot of capital in its operation. So the SNX token becomes very important and will constantly increase over time due to the continuous debts due to the creation of derivatives.
For this introductory article on Synthtix I think we have already talked about several things. If you want to find out more details about this cryptocurrency, I suggest you follow me on Publish0x to receive the notification on the next article, which will be released next Sunday, dedicated to SNX!
For any question or proposal leave a comment below!