Synthetix is a multi-functional decentralised finance platform based on the Ethereum blockchain. How does Synthetix work? First and foremost, it functions as a decentralised exchange or DEX. Second, it performs the function of a synthetic asset issuer. Finally, it provides an incentive system. To understand each, let us dive into them one by one. We will also go over two of its most popular features: minting and staking.
1. Synthetix is a Decentralised Exchange or DEX
A DEX has the advantage of not requiring users to register with a central authority. All users only need to connect to the exchange using a suitable ETH wallet like MetaMask because now everything gets done through smart contracts. They will then be able to trade.
2. Synthetix is a DEFI that issues Synthetic Assets
First, we must comprehend synthetic assets. A synthetic asset is just a tokenised derivative that mirrors the value of another asset. Users of Synthetix can generate such, which are known as synths. Synths are blockchain assets linked to real-world assets such as fiat currency, cryptocurrency, and commodities. Their price is tracked in real-time by chainlink oracle data feeds, allowing investors to purchase, sell, and trade on these assets just like the actual thing, but without the need for a central body.
All synths minted on the platform have -s mark on them; for example, sTSKA, sUSD, sBTC, sAU, and sAAPL. There are also indexes (ex. sCEX), which give investors exposure to a range of centralised exchange tokens like Binance coin and Kucoin shares. However, while synths give investors exposure to real-world assets, they will not provide synth investors with the dividends that genuine stockholders do.
3. Synthetix has a Reward System in Place
Synthetix has an incentive structure that compensates users for staking SNX tokens to help the ecosystem maintain liquidity and stability.
Now, what is SNX?
The Synthetix ecosystem utility token is the SNX coin. To create Synths, users buy SNX tokens and deposit them as collateral. In March 2018, 100 million tokens were released, with the number expected to rise to about 250 million by 2024. According to Coinmarketcap, there are 114,841,533 circulating SNX coins and a maximum supply of 212,424,133 SNX coins as of March 2, 2022. It is currently ranked 130th on Coinmarketcap.
What does its enormous market capitalisation indicate? A cryptocurrency with a considerably greater market size, according to Coinbase, is more likely to be a more stable investment than one with a much smaller market cap, similar to how a gigantic ship can safely handle harsh weather. A trader has fewer opportunities to profit because the price does not tend to climb quickly in a large market cap. So, how do we say that? Assets with a massive market capitalisation decline less than those with a modest market capitalisation. Because the price of crypto does not rise much in this circumstance, one cannot expect huge profits after purchasing it at a low price. On the plus side, traders have less risk because the price does not drop dramatically.
Let us have a look at its volume as well. Volume is an essential indication for traders and investors. It tells us that when the transaction volume of a specific coin is large, so is its demand. CMC recorded USD 97,306,771 in trading volume for Synthetix in the preceding 24 hours, reflecting a 125.02 per cent increase. Its current price is USD 4.10, with a 24-hour trading volume of USD 65,047,672.
Crypto Exchange Platform Options
You can buy SNX tokens at top exchanges, such as Binance, Coinbase Pro, and OKEx. If you are not into SNX, you can consider other crypto platforms that transact various coins like Robinhood, Kraken, and Gemini. Some platforms have additional benefits, such as connecting to professional crypto brokers. A great example of this is Yuan Pay Group. But before choosing an exchange, a trader must first study what to trade. The best place for that is Coinmarketcap because it provides real-time data for almost all cryptocurrencies.
Feature: Mint Synths
Minting in the blockchain refers to the process of confirming information, producing a new block, and recording that information onto the blockchain. Users must first back the sum with a 750 per cent collateralisation ratio to mint Synths. It means that to mint 100 USDT, you must deposit the equivalent of 750 USD in SNX tokens. The high ratio is essential to act as a buffer against large price movements in the market and may be increased or decreased in the future.
When you mint synths, you claim a piece of the debt pool of the platform. The debt pool represents the entire worth of all synths in the system. It means that your debt may rise or fall based on exchange rates and the supply of Synths in the network. To unlock your SNX and quit the system, you must repay the loan by burning synths worth the amount owing.
Feature: Staking
Holders of SNX tokens get the reward for staking by receiving a share of exchange trading fees, as well as staking incentives. Every trade on the platform earns a 0.3 per cent exchange charge, which is then remitted to a fee pool and divided to SNX staking traders every week together with their earned staking incentives.
Other Information about Synthetix
Kain Warwick is the founder of Synthetix, an Australian investor and cryptocurrency entrepreneur. The resulting token network of Synthetix offers a wide range of use cases, including trading, lending, payments, remittance, eCommerce, and many others.
To know more about Synthetix, you can go to their website. You can check information, such as Synths, SNX Staking, SNX Governance, Partners, and a lot more. You can also check their lite paper is on Docs. Synthetix. Synthetic has a community in Discord, which has 33.3 thousand members as of the moment. They are also on Twitter with 188.6k followers and 2,882 tweets.
Closing Thoughts
Unlike existing exchanges, the Synthetix platform can provide investors with endless liquidity and supply, as new tokens can be produced and burned at any time. Synthetix can synthesize any asset in the universe and lock up its equivalent value in the DEFI world.
Remember that it is vital to conduct additional research before investing in any cryptocurrency. Because the crypto market is already volatile, it’s best to take the required measures before making significant decisions. Remember to stay away from FOMO, do your homework, and only invest what you can afford to lose.