Synthetix is a decentralized issuance protocol that allows people to create synthetic assets often referred to as Synths on the Ethereum blockchain. In simple terms, it is a piece of software that allows people to develop crypto assets that can mimic real-world assets such as the dollar, euro, or Bitcoin.
Here’s a closer look at our token of the week.
Synthetix is an issuance protocol that enables the creation of new crypto assets through code alone. Since it’s a decentralized platform, there is no need for an intermediary to enable anything. Instead, it relies on smart contracts running on the Ethereum blockchain.
In addition, creators of synths or crypto-assets don’t need a particular institution or person to manage or custody the assets they create.
Synthetix is the brainchild of FinTech entrepreneur Kain Warwick. The project has already raised $30 million on the sale of 60 million HAV coins in 2018.
Synthetix works by simply allowing users to create Synthetix assets or crypto assets on the Ethereum blockchain. The resultant crypto assets or Synths come in the form of ERC tokens capable of tracking the value of underlying assets.
Synthetix enables the creation of new assets in a process dubbed collateralization. To create new synths, users must provide collateral in the form of SNX, the native token powering the Synthetix network.
In this case, users looking to create new assets must first purchase SNX tokens which are then locked in a special contract and used to generate the new assets dubbed synths. For instance, a new asset created to mimic the US dollar is dubbed sUSD, while that one created to mimic Bitcoin may go by the name sBTC.
|24-hour volume||$192,956,924.96 million|
|Total supply||215,258,834 SNX|
|Circulating supply||114,841,533 SNX|
|All Time low||$0.03242|
|All Time High||$28.77|
Created synths can be used to track the value of the underlying assets using special data feeds such as Oracles. In this case, users and owners would be able to gain exposure to gains or losses in those markets.
Additionally, the value of the SNX tokens locked for use in creating new assets must remain at or above 750% of the value of the Synth made. For instance, if a person were to deposit $1,000 worth of SNX coin, they would end up receiving $133 worth of USD synth or sUSD.
Market forces determine the value of SNX. Consequently, the amount of synths that can ever be in circulation depends a great deal on the underlying price of the native token. For instance, whenever the price of SNX increases, the network is often prompted to release more tokens into the network to guarantee the synths already created. The newly released tokens can be locked for use in the future to create new crypto assets or synths.
After rising to record highs of $28.89 a coin in value, the SNX token has come under immense pressure on volatility in the crypto market, edging higher. The cryptocurrency has shed nearly a third of gains from record highs, having struggled in recent days to rally above the $16 a coin level.
This week, DeFi project Lyra, announced a rewards program tied to the protocol’s sUSD stablecoins. The news pushed the value of SNX significantly higher as it indicates growing traction for this niche platform.