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A decentralized exchange where you can trade physical assets, fiat and crypto assets against each other? So where can you literally convert your tokens into gold, or buy a share in Apple with cryptocurrency?
With their network, Synthetix (SNX) offers the possibility for exchange between the off-chain financial world and that of the blockchain world. The development of this DeFi project was therefore followed with interest from both crypto investors and investors on the regular stock exchanges. But how does it work?
The acceptance and usability of crypto in the financial market
From 2021, not a day will pass without news about blockchain, Bitcoin (BTC), and other altcoins. In the years before that, the world of crypto and blockchain seemed to be separate from what was happening in the rest of the universe. Crypto seemed to be a planet unto itself. Planet crypto had its market and the world had Wallstreet, the exchanges in Shanghai and London with currencies and other financial products like stocks or derivatives. But this too is changing. Planet crypto is increasingly integrating into the world and the world is increasingly accepting that Planet crypto exists. It's not a 'far-from-my-bed-show' anymore.
For example, the role of blockchain and cryptocurrency is becoming increasingly visible on the regular stock exchanges. Crypto exchange Coinbase has since had an IPO and investment bank Goldman Sachs has now made it possible for clients to invest in cryptocurrency through them as well.
Synthetix is now developing in reverse. The financial products of the off-chain exchange can now also be traded on "planet crypto". Synthetix makes this possible with a decentralized exchange where exchange between off-chain assets (assets are assets with economic value) and crypto-assets can also take place.
This can be done by creating synthetic assets. What are those synthetic assets? They are a kind of token "pegged" to the value of a commodity, derivative, or cryptocurrency. Pegged is a term that is common when talking about synthetic tokens. It means pinned and fastened. The synthetic token is, as it were, pinned to the value of the underlying physical asset. Synths is the specific name for the synthetic tokens created on the Synthetic Network.
We have already mentioned the great advantage of Synths above. In this way, you can trade cryptocurrency with currencies, derivatives, or commodities on a blockchain network. For example, you could never buy shares on a crypto exchange with Ethereum tokens. Now that is possible through the Synths that serve as proof in the blockchain world of assets and financial products from the off-chain world.
Another advantage is that these Synths can have a more stable value because the underlying asset has. For example gold has a fairly stable value, the Synth sXAU then has the same stability.
Now there are also other protocols that create tokens that are tied to financial products on the regular exchange. An example is PAX Gold. The difference between this asset and Synths is that the PAX tokens represent real amounts of gold in a vault. Synths are a kind of “just real” asset. They are a reflection of the real assets and only represent the values.
The Synthetix protocol has various synths that have different types of underlying values. Within the Synth protocol, these possibilities are also being expanded further. In 2021, the following types of Synths can be minted, created, or traded:
At the Synthetix exchange, you can therefore trade the Synth tokens and thus in a sense also the assets that the tokens stand for. Synthes trading goes from the Synthetix site to Kwenta, a DEX built on the Synthetix network.
The exchange actually works in the same way as on other decentralized crypto exchanges. You do not need to create an account for this, you trade entirely via smart contracts in which everything is recorded. Therefore, knowledge of you as a platform user is not necessary and you do not need a party such as a bank to check transactions. What you do need to trade is a wallet suitable for Ethereum tokens. Metamask is one of the most used wallets for this. You also need an amount of ETH to pay the gas fees, payments for the use of the Ethereum network on which everything Synthetix is built. Ethereum is available on all well-known exchanges such as Binance or the Dutch Bitvavo.
Perhaps you have only used exchanges that are only suitable for crypto until now. You will see that this Synthetix exchange works about the same. A difference is that for trading with Synths with underlying assets, the opening hours of the exchanges where these assets are traded are used. So you can only buy an sTSLA during the opening hours of the American stock exchanges. Trading in forex continues 24 hours a day, but this also stops on weekends or on international holidays. The Synths are then set to "paused."
There are several exchange platforms that are integrated with the Synthetix network. This guarantees the liquidity, the payment capacity of the network.
In 2021 these are:
You can mint or create Synth tokens via the protocol itself. A dApp has been built in the Synthetix network for this, which makes this quite easy. Mining requires the SNX token as collateral. With the Synthetix smart contract, it is checked whether a striker has sufficient collateral. This is 750% at the moment in 2021. For minting, a web3 wallet must be linked to store your SNX and synth tokens.
Synthetix is built on the Ethereum network. The protocol token, which is the blueprint for the tokens, is, therefore an ERC20 token. This is an Ethereum token. Furthermore, Synthetix has a partnership with Chainlink. This is an oracle network. By means of an oracle you can link information from the real world to smart contracts. So the price changes of the assets with which the Synths are bound, are automatically applied to the Synths as well.
For example, the sJPY will continue to hold the same price as the Japanese Yen to which this Synth is linked. With the Synths and the connection with Chainlink, other oracles can be built and run based on the Synth and the Synthetix network.
In addition to the Synth token, the platform has the SNX token. This is a token that supports the protocol. It is also an Ethereum token. The token is used as a reward and collateral for staking and minting. The process of minting has already been discussed above. Staking means that you keep the SNX tokens in your wallet. Holding the tokens keeps the price more stable. For this, you will be rewarded with tokens by the protocol.
With the SNX token, the liquidity is guaranteed, that there are enough tokens to serve as collateral and that the protocol has sufficient payment capacity. The SNX tokens are the guarantee for the Synth tokens and thus serve as collateral. The ratio of the collateral is therefore also very high to avoid liquidation.
1 billion SNX tokens were released in 2018 with the following distribution:
The SNX token started in 2018 with a price of 0.484 USD. The price bottomed out in January 2019 when the token was worth 0.0348 USD. But since then, the SNX token has slowly but surely crept up.
2020 and 2021, the period when DeFi projects really started to boom, you can also see big increases in the SNX token with an All-Time High in February 2021 of USD 28.53. In the second quarter of 2021, the price has collapsed and is hovering around USD 6 at the end of this period.
It remains to be seen how the token and the network will develop further.
Despite significant corrections in prices in the second quarter of 2021 on the entire crypto exchange, people are hopeful. Analysts based on the trading volumes, the development of the platform, and the number of users of the SNX token are therefore also reasonably positive for the future.
The SNX can be traded on well-known trading exchanges such as Binance, Okex, Huobi Global, Coin Tiger, FTX and the Dutch trading platform Bitvavo.
Founder and writer of Synthetix's white paper is the Australian Kain Warwick. Synthetix was founded in 2017 as Havn. A year later it was renamed Synthetix. As a name, Synthetix turned out to be a better fit with the future that the founders had in mind with the project. The Synth token could also be used for more assets than the HAV token. This was only suitable for stable coins.
The financing of the project was raised by investors over the period from 2017 to 2019 through sales and fundraising. This started with a seed fund, fundraising to raise the start-up capital, which in 2017 yielded USD 51.3 million. 1,900,000,000 tokens were then distributed for 0.27 USD per token.
In 2018, 2 ICOs took place. In the first, 52,000,000,000 tokens were distributed. The tokens were sold for 0.00054 ETH or 0.47 USD cents per SNX token. This ICO raised USD 2,444,000,000. At the second ICO, 610,000,000 tokens were distributed USD 0.790 per token. USD 481.9 million raised this ICO in total.
Finally, in 2019 there was a foundation sale where 50,000,000 tokens were sold to Framework Ventures.
The Synthetix protocol was developed and built between 2018 and early 2020. After 2019, the supply of tokens in the market was expanded from the fixed number of 100 million to 250 million over a period of 5 years. The increase in the number of tokens is done to reward strikers. The size of the reward is halved in the 5th year of staking.
The idea and project as a whole has always attracted great interest. In 2019 Synthetix was one of the so-called blue chip projects. These are projects that are universally considered very reliable and solid. Synthetix had at that time withdrawn 1.2 billion USD in value.
By 2021, the protocol will be fully operational and still under development. The roadmap for the future is further explained and highlighted by the developers in the blogs. In January 2021, founder Kain Warwick discussed in detail the plans that are still on the agenda.
These include:
Synth V3z - Revamps and adapts Synthetix's original architecture. For example, a new working mechanism will be introduced that makes SNX freely transferable.
Further design of the governance structure - The governance of the majority is now largely organized in a decentralized manner. New changes will be introduced from 2021 that will make proposing, voting and monitoring the protocol even better.
Introduction to Synth futures - A future is a financial trading product on the regular trading exchange. It is a forward contract in which an underlying asset is traded by means of a contract on a specified delivery/expiration date for the price of that specified expiration date. It will therefore also be possible in 2021 with Synth Future.
Assets Expansion - Plan is to expand the amount of assets being traded. This makes it even more attractive to trade.
Dapp upgrades - The dapps get upgrades to optimize their operation.
OptionsDAO - In addition to the independently functioning SynthetixDAO (DAO is a decentralized autonomous organizational structure), there will also be a standalone DAO for the Synth options in 2021, the OptionsDAO.
Acquisitions and expansion - Synthetix wants to expand the network and also work with various other DeFi providers.
Kain Warwick has already worked on various cryptocurrency projects before the founding of Synthetix and was the founder of Pouncer, an auction site. He also co-owns blueshyft, a payment gateway for online services.
Other members on the board of the Synthetix foundation who founded Synthetix are Peter McKean CEO and Jordan Momtazi former COO. The directors have a wide network, especially in Australia, and are responsible for a number of successful start-ups. Under the leadership of Warwick, the protocol has the quality to develop from the foundation and has also proven this.
Initially, the management and direction were from this team, but it is now transferred to the community and decentralized. The different parts of the Ethereum protocol are divided up and each gets its own form of DAO. This means that the token SNX and also the protocol get their own Decentralized Autonomous Organization.
The management is then established by means of smart contracts. Modifications or proposals are handled by a council or community. This process is transfer of management is from 2020 to the. The plan is also to set up a standalone DAO, or an independently functioning DAO, for the development and management of the options, the Synth options.
Synthetix has a solid base of a number of investors who believe in the project.
These are investors who have made several large blockchain projects possible:
Although the protocol is solid, analysts also see the necessary risks for Synthetix. Liquidity is vital for an exchange or a DeFi and this is where the greatest risks lie for Synthetix.
While the high ratio and collateral system of SNX tokens for Synths is solid, it is supported by the value of a single token species. If for whatever reason, this suddenly changes, this can affect liquidity.
Furthermore, trading with synthetic assets is of course not completely insensitive to fraud. If there is low liquidity, the price is also easily manipulated by pumping up the price with large purchases and by dumping in time to take off with the profits. The Synthetix protocol therefore only trades in assets with high liquidity, such as gold or silver.
Because there are similar exchanges on the rise and synthetic assets in development. There is a chance that investors and investors will opt for these platforms and the liquidity of the Synthetix platform will decrease.
Initially, it was criticized that the administration was still quite centralized. But with the further decentralization and the introduction of the governance structure, this no longer applies.
Synthetix is quite a unique DeFi application that, with an ambitious team and investors who believe in the project, is starting to build a name and fame in the crypto world. 2020 was a good year for the price of SNX token, which held up well in the March crash of that year. The trading volume of Synthetix also shows favorable figures.
The second quarter of 2021 was a period with significant price declines for almost all cryptocurrencies, including Synthetix. The question is how the token and the exchange will recover. In any case, there is hope among investors and analysts for Synthetix.
