Synthetix is a decentralized liquidity provisioning protocol built on Ethereum and Optimism, enabling the creation and trading of synthetic assets and derivatives without traditional counterparties.
Key takeaways
- Synthetix provides infrastructure for onchain trading and derivatives, including spot synths and perpetual futures
- The protocol is powered by SNX token stakers who provide collateral to underpin synths and earn fees for doing so
- As of September 2024, Synthetix has over $263 million in total value locked (TVL)
What is Synthetix?
Synthetix is a DeFi protocol that allows users to create and trade synthetic assets called synths, which track the value of real-world assets without requiring ownership of the underlying asset.
The system is collateralized by stakers who lock up SNX tokens and mint Synthetix's sUSD stablecoin, enabling trading with excellent liquidity and no slippage between Synths. This pooled collateral model solves liquidity issues faced by traditional DEXs and provides the foundation for various derivative products.
Additionally, it's worth noting that Synthetix is also in the process of developing its own Layer 2 (L2) app chain, SNAXchain. Built atop Optimism's Superchain tech, the L2 will serve as a neutral hub at the center of Synthetix's various deployments.
What is Synthetix V3?
The Synthetix community is currently in the process of migrating to Synthetix V3, a major infrastructure upgrade designed to enhance the protocol's scalability and efficiency. Key features of V3 include:
- Multi-collateral staking, allowing a wider range of assets to be used as collateral
- Permissionless pools, giving liquidity providers more control over market exposure
- Improved risk management through fine-tuned control of LP risk
- Cross-chain functionality, aiming to power derivative markets on multiple EVM chains
Why Synthetix?
Synthetix offers a unique value proposition in the DeFi ecosystem, as its infra provides deep liquidity and low fees for trading synthetic assets and derivatives, eliminating the need for traditional order books or counterparties through peer-to-contract (P2C) trading.
This model not only streamlines the trading process but also expands accessibility to a wide range of asset classes through synthetic representations, allowing users to gain exposure to various markets without holding the underlying assets.
Additionally, Synthetix's composability with other DeFi protocols enhances the overall functionality of the ecosystem, creating synergies that benefit users across multiple platforms. Some projects currently building on Synthetix include:
- Kwenta — A spot and perpetual futures trading interface
- Lyra — A decentralized options protocol
- Polynomial — An automated financial derivative strategies hub
- Decentrex — A perpetual futures trading platform
- 1inch/Curve — An atomic swaps integration
How to invest in Synthetix?
Investing in Synthetix involves purchasing the SNX token, which can be bought on various centralized and decentralized exchanges. The SNX price is currently $1.40 per token, with a market capitalization of $460 million.
SNX serves both as a utility and governance token within the Synthetix ecosystem. Holders can stake their SNX in Synthetix V3 by depositing into the new Spartan Counceil SNX pool to earn a share of the trading fees generated by the protocol.