If Synthetix can continue making moves to form additional partnerships that help increase fee generation, it will survive the bear market and appease their stakers. With the increase in trading volume, this helped increase staking yields from fee generation, which can be used to pay off debt and maintain confidence in the health of the protocol. Despite falling over 90% from its highs, none of the top 20 wallets have been liquidated and the largest holder of SNX and debt, the community treasury, is dedicated to servicing its debt. That being said, Synthetix has been able to survive for four years and their overall health can be easily monitored. The protocol relies on stakers to pay down their debt to maintain the network c-ratio while absorbing potential liquidations. Although Synthetix is currently overcollateralized, it can still implode if SNX crashes since staked SNX acts as collateral. DeFi Protocols, and SNX, Come With RisksĮvery DeFi protocol has its risks and Synthetix is no different. In March, Synthetix launched perpetual futures on their synths, which was integrated by the protocol, Kwenta, and also contributed to this surge in trading volumes. Stakers receive a percentage of the protocol’s trading fees in sUSD along with SNX rewards from inflation. Stakers must pay back this debt before they can withdraw their staked SNX.
Whenever a new synth is minted, the staker creates a debt that changes with the exchange rate. Therefore, users must lock 2.7 times more value of SNX than the value of synths they mint. The amount of synths that can be minted is dependent on the collateralization ratio (c-ratio), which currently sits at about 270%. Users can stake SNX in a smart contract and mint synths against it. The SNX token is used as collateral to mint synths. This is because the smart contract burns the input synth and mints the corresponding value of the output synth. The Synthetix protocol also includes a DEX where these synths can be swapped without requiring a counterparty to hold the synth being swapped for. All synths start with “s”, so a USD synth would be displayed as sUSD. These synthetic assets or “synths” allow users to gain exposure to the underlying asset while benefiting from all of the advantages of decentralization. Synthetix Network is a decentralized synthetic asset issuance and exchange (DEX) protocol that was initially launched in September 2017. Fees generated by Synthetix on Ethereum Mainnet What is Synthetix Network?
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