Synthetix Network Token: What Is SNX in Crypto?
The rapid growth of the crypto space has introduced plenty of exciting protocols. One that stands out is Synthetix. Its design enables users to bet on the value of both crypto and real-life assets.
This article will explain the Synthetix protocol and answer the question of whether the Synthetix Network token (SNX) is a good crypto investment. Let’s start by explaining Synthetix and how it works.
What Is Synthetix?
Synthetix is a derivatives liquidity protocol that is built on the Ethereum network, which enables anyone to trade derivatives in the DeFi space. It can issue different synthetic assets from both the physical and digital worlds. These synthetic assets are known as synths, and anything that has value can become a synth. This includes fiat currencies such as the dollar, cryptocurrencies like Ether or Bitcoin, and precious metals including gold and silver.
The Synthetix protocol is DeFi’s answer to futures, as its users can essentially bet on the value of different synths. Everything is realized through smart contracts and with the help of dApps. The whole system is quite complex, but we’ll break it down for you in the next section.
How Does Synthetix Work?
Synthetix relies on two separate tokens to function. These are SNX and synths. (We’ll go into more detail about these in the following section.) The system combines fees, inflation, collateral, and staking to operate. The thing that makes this protocol special is how it collects the prices of all the assets it can issue.
Synthetix uses Chainlink’s decentralized oracles, which are more accurate and impossible to manipulate. With accurate current prices, all the synthetic assets have a correspondingly correct value.
On the governance side, the protocol was first governed by the Synthetix Foundation. Though this was a not-for-profit organization, it was necessary to decentralize the control of the protocol even further. Enter three different DAOs, each responsible for other protocols:
- Synthetix DAO: A DAO which funds those who participate in advancing the protocol.
- Grants DAO: This organization funds community proposals that steer the protocol in the right direction.
- Protocol DAO: This governing body is crucial for developing smart contracts and updates of the whole protocol.
The whole governance occurs through two artifacts known as SIP and SCCP. SIP stands for Synthetix Improvement Proposals, and SNX holders use it to make protocol improvement proposals. SCCP stands for Synthetix Configuration Change Proposals, which shows all the proposed changes for the protocol.
When someone creates a proposal, the Spartan Council, which is the main governing DAO consisting of 8 members, discusses SIPs through interviews. After evaluating all the implications of a proposal, they either accept it or deny it.
One of the most significant milestones in Synthetix’s development was the shift to Optimism Layer 2 Ethereum. It meant significantly lower gas prices much and better scalability, allowing the protocol to move forward faster and keep growing with new features.
What Is the Synthetix Network Token (SNX)?
Synthetix Network Token (SNX) is an Ethereum token that powers the Synthetix platform. It’s an ERC-20 token, meaning that it operates thanks to smart contracts. The platform’s complexity is a testament to the power of the Ethereum network.
Just what is Ethereum, exactly? Unlike Bitcoin, Ethereum’s network goes a step further, allowing developers to create dApps and smart contracts that run on its network. With the right approach and creativity, it’s possible to develop systems which support various functions.
On the other hand, the ERC-20 token is an asset on the Ethereum network. What Bitcoin is to the whole world, ERC-20 tokens are to the Ethereum network. In short, people can exchange them and use them for different purposes.
What Is SNX Used For?
SNX plays a vital role in the Synthetix platform. SNX tokens are used as collateral when you want to create synths, which are synthetic assets that you can trade with other protocol users. In this way, you don’t actually hold the underlying asset, but rather trade with what it’s worth.
This dynamic makes the whole platform quite similar to traditional binary options. You don’t own the actual asset; instead, you bet on its value by trading it with others.
Therefore, SNX and synths are two separate things. To obtain a synth — which can be a synthetic BTC, dollar, gold, Tesla stocks, or any other synthetic asset — you have to stake SNX on the platform.
By doing so, you create collateral and back the synth you’ve created. It’s important to note that the collateralization ratio is 600%. This means that for 100 sUSD, you need to deposit SNX tokens worth six times more. The governance manages the collateralization ratio.
SNX tokens are also considered governance tokens, meaning that token holders influence the decisions of the whole protocol. This is a great way to keep the protocol decentralized — essentially all holders have a say in making crucial decisions.
SNX holders can create proposals and those with SNX have the voting rights and can make decisions.
How Do I Stake SNX?
Staking the Synthetix Network token (SNX) is a simple process. Once you have the tokens, you can use them to make synths. Other dApps also play an important role in this process.
One such app is Mintr, an NFT marketplace with which you stake SNX. Its dApp allows you to make a synth sUSD which you can trade on Kwenta, which is a decentralized exchange (DEX). If you don’t want to trade your synth sUSD, you still get a reward for staking SNX in the system.
That’s because you’re helping to manage the system. The reward comes from the current monetary policy, and the exchange rewards when people trade synths.
The entire process is straightforward. However, to get a better picture of the complete system, it’s best to detail the whole Synthetix ecosystem.
The Synthetix Ecosystem
The Synthetix ecosystem is a big one, as there are already several projects relying on the protocol to power their platforms. The biggest ones are Curve, Lyra, Thales, Kwenta, ParaSwap, dHEDGE, Yearn and Aelin.
Curve Finance makes it easy for its users to swap from one cryptocurrency to another. The platform is the perfect addition to the DeFi ecosystem. It integrates with Synthetix to get the correct pricing of different pairs on its platforms.
This integration provides the best pricing and low fees, making Curve’s platform an ideal swapping option for eager traders.
Lyra is the first completely decentralized options protocol. It enables European options trading, and its platform integrates with Synthetix to make the trading process seamless. It also ensures low fees and quick transactions.
Those seeking binary options platforms will find Thales offers a broad range of trading options via its protocol. Traders can rely on sUSD, which Synthetix provides. As the seed investor of the whole protocol, there’s a high degree of support for this project from Synthetix’s side.
The platform also uses Chainlink as its price feed, ensuring that assets’ prices are always correct and immune to any significant fluctuations.
Kwenta is a decentralized trading platform that’s completely powered by Synthetix. It leverages the protocol and enables traders to exchange real and derivative assets. Once you start using the platform, you can trade sUSD for other synthetic assets.
The platform keeps up with the latest changes, and is already running on the Layer 2 Optimism scaling protocol we mentioned earlier. This trading platform is critical for the success of Synthetix, as this is where users can trade a wide range of synths. People can also trade Synthetix’s perpetual futures. The protocol promises the best futures prices in any asset class, which means that on-chain permissionless futures allow traders to get prices for any market. They can trade futures on commodities, cryptocurrencies or fiat currencies in one place.
Furthermore, it’s the place where people can trade Synthetix’s perpetual futures. The protocol promises the best futures prices in any asset class. That means that on-chain permissionless futures allow traders to get prices for any market. They can trade futures on commodities, cryptocurrencies or fiat currencies in one place.
ParaSwap is a DEX aggregator, meaning that its users can benefit from the best ERC-20 token swaps. The platform’s USP is that it has supported synth trading since October 2020. Users on ParaSwap can trade real assets, such as Ethereum, for sUSD. Furthermore, the platform allows users to swap one synth for another.
ParaSwap is one of the biggest liquidity aggregators in the DeFi space, and the availability of synths on the platform was a massive step for the synth market.
Hedge funds are a very popular investment opportunity in the real world. This platform is the crypto space equivalent. It allows users to invest in various synthetic assets on Ethereum. In addition, dHEDGE presents some of the best investment pools in the crypto space.
With a clear track record, users can quickly pick the best investment opportunity and leave their investments to grow over time. Once investors start using the platform, they can opt for a broad range of synth asset pools.
Before investing, the user can see everything about the pool, including its history and who’s managing it. In addition, dHEDGE allows users to make informed decisions, lowering their investment risks.
Yearn Finance is a gigantic DeFi platform that lists the best trading protocol opportunities. It attracts thousands of investors, bringing more people to the synth ecosystem. Being a part of Yearn Finance is a big step for the entire Synthetix platform.
Aelin is an upcoming fund sourcing protocol. It will coordinate permissionless deals by using the Synthetix governance principles. The DAO will launch after Aelin’s forthcoming ICO.
Is SNX a Good Investment?
Judging from the current state of DeFi, it looks like SNX is an excellent long-term investment. The platform pioneers synthetic trading options, and without too much challenging competition, it’s ready to grow big — quickly.
Another indicator of the token’s health is the vast ecosystem of platforms supporting its synths. As synths continue establishing a presence on various DEXs, the value of the SNX token will keep growing.
Even though the crypto space is unpredictable, SNX is likely to become a good long-term investment. The token is one building block of a handy platform that has yet to grow.
How Do I Buy Synthetix Network tokens (SNX)?
You can purchase SNX in a couple of ways. Each of them is straightforward, so it comes down to personal preference. One of the ways you can acquire SNX is by first obtaining Ethereum, which you can purchase on various online exchanges. Once you have ETH, it’s time to head over to Kwenta.
There, you can use your ETH, exchanging it for sUSD, which is the by-product of SNX. You can then use sUSD to purchase other synths on the platform and trade them.
On the other hand, you can visit an exchange that has an ETH/SNX exchange pair listed and exchange your Ethereum for SNX tokens.Image source: Bybit
Here’s how to do that with Bybit:
- Register an account (or log in) on Bybit.
- Pick different currencies in order to see available pairs. You can use USD, GBP or EUR to purchase BTC, ETH or USDT.
- The best approach is to first purchase USDT, so that you face the lowest fees when switching from one currency to another.
- Then, use your USDT to purchase SNX on Bybit.
- That’s it! You now have SNX in your Bybit wallet, and you can transfer it to Mintr to mint synths and earn a commission. Alternatively, you can use your SNX to trade with other synths on Kwenta.
Getting SNX is a simple process, If you’re eager to try trading synthetic assets, you can easily do so by first acquiring SNX. Click the button below to find out about the current Synthetix Network token price and get going!Buy SNX tokens on Bybit today!
The Bottom Line on Synthetic Network tokens (SNX)
SNX is a promising token that powers a very versatile platform. Minting synths is a great way to securely bet on the value of real-world assets, as well as digital assets. You get a chance to make a profit without actually owning any of the underlying assets.
Given that Synthetix is part of an ecosystem which is continuing to grow, investing in SNX seems like a good opportunity. If you want to get your hands on SNX tokens and start minting and trading synths, register on Bybit and make your investment. Simply use USDT to purchase as much SNX as you’d like and you’re ready to go.