05.05.2023
Synthetix — what is it?
Synthetix is one of the decentralized finance protocols that was developed on the Ethereum system. SNX — allows its users to use assets that have a name — synthetic, like cryptocurrency tokens. This application is considered the most successful and popular in DeFi, since its cost was about 2.6 billion US dollars, and it also occupied its place in the top ten applications for a very long time. Initially, SNX was developed for the Haven cryptocurrency as a stablecoin. At the beginning of 2019, the project was rebranded and it significantly expanded its scope of activity and introduced a new brand called «Synthetix». The brand gained momentum and recognition only when a wave of interest in DeFi protocols broke out in the digital market. The relevance of this protocol is explained by the fact that it opens up the possibility of using synthetic assets. Let's figure out what it means and why it is needed.
Synthetic assets — what is it?
The idea itself is not considered new for cryptocurrency, since many projects use it like traditional finance. Its essence lies in the fact that traders, investors and analysts create some kind of synthetics to reflect the functions of the selected instrument, but with completely different characteristics. For tools that perform a financial role, there is some flexibility, because otherwise they would simply be deleted.
An example is a futures contract that functions in an options ecosystem. The investor acquires different types of options that have the same pricing policy and term of operation. Such options will perform the functions of the same futures contracts, since here, too, it will be possible to speculate on a fall or an increase in the price. The biggest difference between them is that futures legally oblige the user to exchange or trade their assets at the price that was agreed in advance. Options, in turn, do not insist on the acquisition or sale of cryptocurrencies.
As for the cryptocurrency industry, synthetics are popular here, as digital tokens, first of all. They reflect the market capitalization of other digital coins, as well as their activity. One such example is the Wrapped BTC token. WBTC is an ERC-20 protocol token that automatically tracks Bitcoin price fluctuations. However, if we compare WBTC and Bitcoin, then the second one cannot be used in the ETH coin ecosystem.
Synthetic assets have the ability to mirror the prices of other assets. Users are given the opportunity to trade their tokens, exchange them for fiat, and other goods, for example, real estate, precious metals, oil, stocks, bonds, etc. Buyers and traders in the traditional market carry out exchange operations directly resorting to the services of a broker. SNX digital assets offer a variable pricing policy and include all the advantages of Blockchain. Namely: instant payments, the absence of third parties and intermediaries, transparency of transactions in the block, low fees and barriers to entry. Any interested person can create an account and start trading a few minutes after registration. As a result, it can be summed up that synthetic assets have a huge potential in the field of liquidity, as well as their introduction into a decentralized digital financial system.
Methods of using synthetic assets
- For speculation in the market. Here you use them without exchanges with a KYC policy. You can buy a variety of assets expensively or cheaply in the Ethereum system itself.
- As a stablecoin. A fairly well-known stablecoin on the digital market is considered a decentralized DAI. However, there are already synths in the guise of Fiat, for example, sUSD, sEUR and others.
- Insurance. A very popular derivative, as well as speculation. Insurance will provide you with protection of funds if the price of the coin has fallen or is just beginning to decrease.
- Investing in large projects. Many investors simply do not have enough time to master a detailed review of small startups. They prefer to choose one large market segment and invest even then. The sCEX index attachment allows you to place bets on several projects at the same time.
- The ability to purchase raw materials and stocks. You can purchase expensive metals and papers without leaving the Ethereum network. All synthetic digital assets will act as a token. They are also used as collateral in DeFi protocols.
- Trading with borrowed capital. The purchase and sale of derivatives is possible using a loan. Thus, the user will open up large positions for trading transactions. However, this option is not suitable for everyone, but only for experienced traders, which is not the first time they face risk.
Synthetix Network Token — what is it?
This is a basic, network asset of the SNX platform that supports synthetic assets. It functions thanks to the support of the Ethereum ecosystem. This cryptocurrency is considered software, which allows you to create an analogue of digital assets (bitcoin) and fiat currencies (dollar or euro). Such functions are available here thanks to decentralization. Many analysts believe that this is a cluster of smart contracts that work thanks to the ETH code. Using it, there is no need for an intermediary specialist immediately. Using ether algorithms, you can do without third parties to manage your crypto assets. All that is required of you is just to observe the serviceability of the work.
Synthetix cryptocurrency functions with an abundance of collateral, as a result, each coin has a huge value. The user can create synthetic assets on his own, before that you just need to put the SNX token as collateral. From this it can be concluded that all synths function on the deposited collateral, thanks to the debt. Each long position in the block supports a certain percentage, which is provided by the management of the platform. This algorithm was developed to maximize synth support and eliminate shortages in the event of a possible collapse of the digital market. Users who are interested in staking and plan to buy SNX first, and then invest in them, should understand that they will have to manage all this manually. You will need to burn debts yourself and add collateral to get a reward at the end.
What does the Synthetix Network Token consist of?
- Synthetix Exchange (DEX) — will allow you to buy or sell SNX with a commission of 0.3%, as, for example, on the Uniswap exchange. The withdrawn commission will be distributed equally among the participants of the SNX staking.
- The Mintr narrow-profile application was developed to save cryptocurrencies and to develop new tokens.
- The main statistics screen of SNX is Dashboard.
Synthetix Network Token Forecast
Many of you often ask questions: «Is it profitable to invest in Synthetix Network Token today?», «Sell or buy SNX cryptocurrency?», «Will SNT remain a good investment?». The answer is quite simple — in order to find digital assets with good liquidity and income, you will have to analyze a lot of information about the Synthetix Network Token, as well as other tokens and coins, in order to make the right investment decision yourself. At the time of writing, the price of the SNX token is 2.55 USD. If we take 5% growth from the average BTC per year similarly for this token, then the SNX cryptocurrency forecast will be promising. From 2.55 USD, the price will rise to 3.05 USD by the end of 2024. It is important to understand that based on the fact that all cryptocurrencies are characterized by volatility, the price of the token can both rise and fall. The final decision is, of course, up to you.
