SNX, or Synthetix, is currently one of the most exciting decentralized finance (DeFi) projects, aimed at issuing derivative products on the blockchain. But what exactly is SNX coin? Is it safe to invest in? What potential does SNX coin have? Let’s explore this coin in detail in the content of this article.
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What is SNX coin, should you invest in it?
What is SNX coin?
SNX coin is the cryptocurrency of the Synthetix exchange. This is a DEX (decentralized exchange), where users can trade ‘synths’ – derivative versions of assets, similar to CFDs. Synths include not only cryptocurrencies but also a range of other assets like gold, commodities, stocks…
In short, to understand what SNX coin is, you just need to grasp the core idea: SNX – Synthetix is a platform for trading derivative products on the blockchain.
The concept is very appealing to those interested in cryptocurrencies and also looking to leverage the advantages that derivatives offer (such as investing without actually owning the assets, hence requiring less capital).
=> This also gives Synthetix a competitive edge over other DEXs, like Uniswap (UNI) and Curve (CRV).
Synthetix was initially established as a stablecoin project named Haven. It rebranded and expanded its scope in early 2019, launching as Synthetix. However, it only started gaining significant traction when the DeFi protocols exploded in mid-2020.
What Makes Synthetix – SNX Coin Special?
What is SNX coin and what makes it special? The crucial problem Synthetix addresses is that it allows users access to assets they otherwise couldn’t.
For example, if you have no way to buy Tesla stocks, you can access Synthetix, stake SNX tokens, and in return, receive sTSLA.
There are many platforms for trading derivatives, for example, LONG and SHORT on exchanges are also forms of derivatives. However, they still depend on intermediaries (the exchanges), and exchanges often penetrate the order book of the system to kill longs, defeat shorts. Therefore, it’s hard to find a reliable platform for trading real-world assets. => Hence, Synthetix was born.
Since Synthetix is a DeFi platform, anyone in the world with an internet connection and SNX tokens in their wallet can create synths. Synths mimic the price of real-world assets like Gold, Silver, Bitcoin, Ethereum, Oil, stocks, etc. Furthermore, many users may prefer trading on Synthetix as it does not require users to complete a KYC process to trade on the platform, unlike traditional financial platforms.
How Does Synthetix Work?
The most important part of Synthetix is using Synths to track the price of real-world assets. Decentralized administrators provide real-time real-world asset prices to Synthetix. Therefore, holding synths is akin to owning real-world assets as they mimic the underlying assets.
You might wonder if a synth is a tokenized asset? It’s NOT! For example, buying a tokenized asset, backed by real-world assets like gold, also grants you rights to the underlying assets. On the other hand, owning Synths does not mean you own any of the underlying real-world assets outside the Synthetix Network. Instead, buying synths only gives you exposure to the corresponding content without ownership rights.
There are two types of cryptocurrencies that Synthetix leverages to exploit synthetic assets.
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First is SNX, the native token of Synthetix (and also the main token we refer to in this article. If you want to invest in Synthetix, you will need to buy SNX).
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Second is Synth, a token representing real-world assets and simulating their prices.
If users want to use Synthetix, they must buy SNX tokens on exchanges. Then, they can convert them into Synths in the form of assets they want to peg the price to. For example, to buy USD, it becomes sUSD, to buy Bitcoin, it becomes sBTC.
But one thing users must remember when creating synths is: The value of staked SNX tokens must be equal to or more than 750% of the value of the synth.
After the Synth is minted, anyone in the world can access it to trade, invest, make transactions, or do anything else necessary with the Synth.
What is the SNX Token?
The SNX token powers the entire Synthetix ecosystem. SNX tokens are used as collateral to create Synths. SNX token holders can stake them and earn a portion of the profits from fees generated by the Synthetix exchange.
The collateral ratio of Synthetix is 750%. This means that if you want to create, for example, sUSD worth $100, you need to stake SNX tokens 7.5 times that value, i.e., $750. This is how the platform keeps synths stable in case of market turmoil.
Some information about the SNX token:
- Token Name: Synthetix.
- Ticker: SNX.
- Blockchain: Ethereum.
- Token type: Utility.
- Token Standard: ERC-20.
- Total supply: 245,312,500 SNX.
- Circulating: 327,769,196 SNX.
A large amount of new SNX tokens will be circulated each year. However, the Synthetix team has applied a deflationary policy to encourage buying SNX and creating Synths.
The policy includes increasing the number of SNX tokens from 100 million in March 2019 to 260,263,816 in August 2023. The release of new tokens decreases at a rate of -1.25% each week. After the supply reaches its target in August 2023, the protocol switches the issuance rate to a fixed inflation rate of 2.5% for the long term.
The Founding Team of Synthetix (SNX)
Synthetix was initially founded as Havven in 2017 by Kain Warwick in Sydney, Australia. The project raised about 30 million dollars in an ICO held in March 2018. One of the largest investors in the project is Synapse Capital.”
In late November 2018, the Havven team announced that they would rebrand the project as Synthetix, and in the first week of December 2018, the rebranding took place.
The head of the Synthetix project is Kain Warwick, who built Australia’s largest cryptocurrency payment platform before starting work on Synthetix.
The CTO of Synthetix is Justin Moses, who has been with the project since its early days. Before joining Synthetix, he was the Director of Engineering at MongoDB. He has extensive experience with large-scale systems, including their design and deployment.
The senior architect of the project is Clinton Ennis, who has 18 years of experience in software engineering. He was formerly a Lead Architect at JPMorgan Chase.
Today’s Synthetix (SNX) Price
Synthetix Network (SNX)
Should You Invest in Synthetix (SNX)?
So, does Synthetix have potential? Should you invest in SNX coin? Let’s summarize its pros and cons for a more accurate assessment.
What are the advantages of SNX coin?
♦ Synthetix enables people to invest in various assets through derivatives on the blockchain.
♦ Synthetix benefits from the burgeoning DeFi trend.
♦ Synthetix has investments from large funds like Coinbase Ventures, Parafi Capital, #Hashed, IOSG Ventures, DeFiance Capital,…
♦ Although a derivatives service provider, SNX is listed on Coinbase (usually US exchanges ban DeFi coins, but SNX is an exception).
♦ Synthetix has a policy to reduce SNX token inflation, reassuring investors.
♦ SNX tokens have multiple uses, not just governance like other tokens.
♦ Synthetix runs on Ethereum, allowing easy interaction with many protocols on this platform.
What are the disadvantages of SNX coin?
♠ Running on Ethereum is also a disadvantage for Synthetix, as it is affected by high transaction fees and slow speed.
♠ Synthetix faces many competitors in the DeFi, Dex, and even in derivatives. For example, Beta Finance (BETA) also allows short selling of cryptocurrencies.
♠ Synthetix also competes with CEXs, like Binance, and needs time for DEXs to become more popular before attracting more users.
♠ SNX coin price is highly volatile, and depends on the overall cryptocurrency market trend.
Does Synthetix (SNX) have potential?
The growth of Synthetix depends on the popularity of DeFi and Dexes. Fortunately, decentralized finance (DeFi) has seen explosive growth in recent years. This is evident from the chart below:
DeFi and DEXes are closely linked. If interest in DEX continues to rise, we may see increased demand for SNX. Therefore, it can be concluded that Synthetix (SNX) has the potential for long-term growth.
However, Synthetix’s competitors possess many advantages and are gradually developing. An example is Mirror Protocol, based on Terra platform. Mirror is gaining traction in derivative products based on stocks, and its collateral ratio requirements are lower than competitors. Furthermore, it runs on Cosmos, so it has higher scalability than platforms running on Ethereum like Synthetix.
If you believe in this project, and think that in the future, the SNX team will have strategies to make Synthetix increasingly attractive to users, then you might consider investing in it. However, in my personal opinion, while SNX coin has potential, it hasn’t made a significant breakthrough, so if investing, only invest a reasonable amount of capital.
Synthetix is leading in the field of derivatives based on blockchain technology. I hope this article has given you some understanding of the project, as well as the Synthetix coin – SNX coin. What do you think about Synthetix, do you think it has potential? Please leave a comment to let us know. Thank you for reading.
