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What is Synthetix?
Synthetic is a token trading platform that allows users to bet on crypto assets, stocks and real-world assets such as fiat-currencies (U.S dollar) and precious metals like gold and platinum. This can all be done using ERC-20 tokens.
Synthetic assets, otherwise known as ‘Synths’, duplicate the price of real-world assets and brings them to the Ethereum blockchain. The system simply allows users to bet on the value of an asset without ever actually holding it.
Recent data shows that Synthetix has a total value of $1.88 billion dollars locked away in smart contracts, rendering it one of the most successful DeFi projects on the market right now.
History of Synthetix
Synthetix was founded by Kain Warwick who first developed it as a stablecoin named Havven. Havven sold 60 million HAV tokens for a total of $30 million back in 2018.
Warwick created Havven when he thought there should be a token available to mimic the performance of real-world currencies such as the Euro or the U.S dollar several blockchains including Ethereum and EOS.
By the end of 2018, Havven was rebranded to Synthetix as Warwick wanted to include synthetic assets for commodities and cryptocurrencies.
What Is Synthetix Used For?
Synthetic is popular among users for its ability to move real world assets into the Ethereum ecosystem. The decentralized network allows users to bet on stocks, crypto and real world assets without the need to even register.
People use Synthetix to track the prices of real world assets through its oracle feed. The oracle feed is a data feed that enables users to see what kind of gains and losses particular assets have had on the market.
What Makes Synthetix Unique?
Synthetix uses a multi-token infrastructure which is built on collateral, inflation, staking and fees. This system is not dissimilar to that of its competitor MakerDAO and uses two types of token which are:
- Synthetics Network Token (SNX)
- Synthetic Assets (Synths)
In Sythentix, the token SNX is locked up to create sUSD (synthetic US dollar) or any other real-world asset. SNX acts as a collateral and the sUSD is the debt. The main difference between this system and MakerDAO is that SNX is staked as the collateral to create any kind of synthetic asset.
The system was originally created so that users could trade Synths. This would allow them to hold on to assets if they thought the price might increase. By staking SNX, asset holders can also create new synths while watching their holdings increase.
SNX tokens are what drive Synthetix as users can only participate when using SNX and receive a portion of any synthetic fee.
SNX is available to purchase through all exchanges and the price as of October 2021 is $10.54 for one token.
As discussed, Synthetix is an ERC-20 token and can therefore be stored in most hot and cold wallets.
What Is The Technology Behind Synthetix?
The technology behind Synthetix is an open-source Dapp protocol on Ethereum. The risk to users is removed using smart contracts and oracle feeds which are provided by Chainlink to remove the need for centralized dependency to enable them to eventually move to a place where the governance is fully decentralized.
It is also worth noting that Synthetix runs using code – and only code. This means that there is no need for a financial intermediary and that users need only rely and trust that the code is executed correctly. The system itself is basically a train of smart contracts running on Ethereum’s blockchain.
Advantages of Synthetix
Synthetix is one of the most popular in the DeFi market with $1.8 billion locked into smart contracts and is already showing its future potential since its inception.
The system connects users of the Ethereum blockchain to assets that may not be in their current chain.
The oracle feed is another strength of the system and enables users to process gains and losses from a particular market before parting with their money.
Is Synthetix A Good Investment?
So far, Synthetic has shown growth in 2021 and doesn’t seem to be slowing down. Having only been on the market for less than five years, it is hard to say just how good of an investment it would be in the long term as there is simply not enough history.
In January 2021, SNX was trading at around $8.50 and has shown strength throughout the year. By the end of 2021, it may even reach heights of $15.
As the price increases, this will bring on new investors which in turn will see developers begin to improve the Synthetix system as it grows. However, the crypto-verse is uncertain and volatile so it is unfair to say for certain whether or not such an investment is worth it. However, looking at the market, it is easy to see that there is plenty of future potential through Synthetix.
Traditionally trading in the real world has never been one for the faint hearted, so this platform is ideal for those with trading and investing experience. The beauty of Synthetix is that it allows users to have a long or short term holding which many other platforms do not offer.
Synthetix works through a decentralized platform that allows users to trade and mine while simultaneously holding stakes on commodities, fiat currency (such as the US dollar or Euro) and equities.
The token based platform enables users to buy its native token known as SNX and synthetic assets known as ‘Synths’ which are then used to bet on real-world assets using its aptly named ‘oracle feed’.
It is one of the most popular DeFi systems on the market today and has shown its future potential with $1.8 billion locked in to the system through smart contracts. If you are thinking of investing using SNX, consider the risks beforehand and make sure you fully understand the process.