What is the DeFi Protocol Synthetix and How Does It Tie Into Synthetic Assets

Unknown Speaker  0:01  

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Michael  0:51  

Welcome to today’s show. Today’s episode is all about Synthetix. What is the DeFi Protocol Synthetix and how does it tie into synthetic assets?. So without further to do, let’s jump into today’s episode. So the Synthetix website is Synthetix.io, Synthetix is a DeFi protocol for synthetic crypto assets. Synthetix is an Ethereum based protocol for the issuance of synthetic assets. I like how the crypto exchange Gemini words it here: Sinned by allowing anyone anywhere to gain on chain exposure to a vast range of assets. Synthetix is a token trading platform built on Ethereum. It allows for the creation of real world assets like stocks and shares to be bought and traded using crypto. Synthetix started out as a stable coin before pivoting into DeFi. Here’s an abstract taken from their lightpaper. Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. These synthetic assets are collateralized by this Synthetix network token, which is also called SNX. That’s the ticker symbol for it, SNX, which when locked in the contract enables the issuance of synthetic assets or SYNTHs, S-Y-N-T-H is what they call it. 

This pooled collateral model enables users to perform conversions between since directly with the smart contract, avoiding the need for counterparties. This mechanism solves the liquidity and slippage issues experienced by dexes. Synthetix currently supports synthetic fiat currencies, cryptocurrencies, long and short, and commodities. SNX holders are incentivized to stake their tokens as they are paid a prorated portion of the fees generated through activity on Synthetics.exchange. So you can swap tokens on their on their exchange, Synthetix.exchange. Based on their contribution to the network it is the right to participate in the network and capture fees generated from SYNTHs exchanges from which the value of the SNX token is derived. Trading on Synthetics.exchange does not require the trader to hold SNX. Let’s go over the token SNX for a moment. Let’s get it some background information. The total value locked currently is just over $855 million. 

The current market cap is just over $1 billion. And the circulating supply of tokens is currently at 114.8 million. The max supply is just over 212 million tokens. The SNX token is currently trading at around $9.43 depending on when you listen to this it fluctuates of course. So who are the founders of Synthetix? The network was launched in September of 2017 by Kane Warwick under the name Havven or Havven it’s H-a-v-v-e-n. About a year later the company rebranded to Synthetix. Kane Warwick is the founder of Synthetix. Prior to founding Synthetix work has worked on several other cryptocurrency projects. Peter McKean is the project CEO and has many years of experience in software development. Jordan Mumtaz, he is the CEO of Synthetix, and Justin Moses is the CTO.

I’m gonna work on getting them on the show, because I’d like you to hear firsthand from them about the awesome things that they have going in this project. Synthetix was initially governed by a nonprofit foundation, but it was dissolved in June of 2020 and replaced by three decentralized autonomous organizations or DAOs. I cover what DAOs are in previous episodes, by the way, especially in the crypto terms one. These DAOs are the mechanisms by which holders of the SNX cryptocurrency can now vote on changes to the protocol and make decisions about its future. So what makes Synthetix unique? Well, Synthetix is a decentralized exchange (dex) and a platform for synthetic assets. The protocol is designed in a way that exposes users to the underlying assets via SYNTHs without having to hold the underlying asset. The platform allows users to trade and exchange SYNTHs. it also has a staking pool where holders can stake their SNX tokens and are rewarded with a share of the transaction fees on the Synthetic Exchange. 

The platform tracks the underlying assets using smart contract price discovery protocols called Oracles. Synthetix allows users to trade SYNTHs seamlessly without liquidity or slippage issues as previously mentioned, SNX tokens are used as collateral for the synthetic assets that are minted. This means that whenever since are issued, SNX tokens are locked up in a smart contract. Another way to break down this project is Synthetix is an Ethereum based DeFi ecosystem that acts as a decentralized exchange, also known as a dex. And as an issuer of assets. It is maintained through an incentive system in the form of staking. Users can speculate for any real asset by creating synthetic assets that track their real time prices via Oracle feeds. I like to break down in my episodes several different ways, since I’m verbally expressing and and sharing this information with you, I found that people sometimes understand more if I break it down in one or two different ways. So that’s the reason why reiterate and try to break things down in a different fashion. So, Synthetix does not require KYC there’s no account to set up. Anyone can get exposure to stocks, high premium bonds, real estate and nearly anything this can be done by depositing SNXs tokens on the platform. 

Those who coined synthetic assets can earn a passive income from the fees generated by the assets buyers. I like how decrypt breaks down what Synthetix is: Synthetix allows users to bet on crypto assets stocks, currencies, precious metals, and other assets in the form of ERC 20 tokens, synthetic assets or since copy the price of an asset in the real world and bring it on to the Ethereum blockchain, giving that since all the properties of an ERC 20 token, holding a since is not the same as holding an asset. For example, a synthetic MKR token is the same price as a real MKR token, but without the voting rights on actual MKR token holder would have, this system allows users to bet on the price of an asset without holding the actual asset. The trading of stocks, currencies, commodities and other assets are still dominated by the likes of Wall Street, London, Hong Kong, and other traditional financial centres. 

Synthetix wants to bring that toolkit over into the decentralized global permissionless and 24/7 world of crypto. I trust that today’s episode has been eye opening for you into the world of DeFi through Synthetix. If you like today’s episode, definitely like and subscribe to the podcast. This show has been heard in 90 countries around the world and continues to grow beyond over 900 cities globally. I love reading your emails and five star written reviews on Apple. If you have a request or just want to drop me a line, email me at show@newtocrypto.io. Until next time, make it a great day.

Unknown Speaker  10:11  

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