Synthetix: everything you need to know about SNX
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What is Synthetix?
Synthetix is a decentralized financial (DeFi) platform on the blockchain that creates synthetic assets. Synthetic assets are digital tokens that track the value of 'real' assets, such as fiat currencies, commodities, stocks, and cryptocurrencies.
Synthetix aims to provide a decentralized infrastructure for creating and trading synthetic assets without the need for intermediaries such as banks or exchanges. The platform uses smart contracts on the Ethereum blockchain to create and trade these assets, utilizing the SNX token as collateral and governance mechanism. The Synthetix ecosystem allows users to trade synthetic assets, bet on market directions, and earn by providing funds.
How does Synthetix work?
Synthetix is a decentralized platform for creating and trading synthetic assets, also known as Synths. Synths are tokens that follow the price of an underlying asset, such as stocks, commodities, fiat currencies, and cryptocurrencies, without the user actually owning the real asset. Synthetix uses smart contracts on the Ethereum network to create and trade these synthetic assets.
The Synthetix protocol works with two different tokens: SNX and sUSD. The system operates through a decentralized network of price feeds called oracles, which relay the current prices of the underlying assets to the Synthetix protocol. Based on these price feeds, Synths are priced and can be traded on the Synthetix exchange without actual transactions occurring on the underlying markets.
Thanks to Synths, users can gain exposure to various asset classes without needing to own the assets themselves. This can offer benefits like diversification and liquidity while also opening up new possibilities within DeFi applications.
The SNX token
The SNX token supports the value of synthetic assets, such as Synths. The Synthetix protocol has two key tokens: SNX and sUSD.
SNX is the native token of the Synthetix protocol. It is used as collateral to create synthetic assets like the sUSD stablecoin. Users who lock up SNX in the protocol can create synthetic assets based on the prices of real assets like currencies, commodities, and stocks. SNX holders are rewarded with a portion of the transaction fees generated by the platform. They also receive additional SNX tokens as an incentive to increase Synths' liquidity.
sUSD is a synthetic stablecoin linked to the U.S. dollar. It is created by depositing SNX tokens into the protocol. Users can trade sUSD on decentralized exchanges and use it as a store of value.
The Technology Behind SNX
The technology behind SNX is built on the Ethereum blockchain. The protocol employs smart contracts to create and trade synthetic assets. The technical architecture of Synthetix comprises various components, including:
- Synthetix Protocol: The core of the Synthetix ecosystem. The protocol uses smart contracts to enable the creation, trading, and settlement of synthetic assets. It allows users to create synthetic assets reflecting the value of real assets like stocks, commodities, and currencies.
- Oracles: Synthetix utilizes various oracles to obtain price feeds of real assets. This ensures that the prices of synthetic assets closely match actual market prices.
- Synths: The synthetic assets created on the Synthetix protocol. Synths have prefixes like sUSD, sEUR, sJPY, etc., depending on the assets they represent.
- Collateralization Ratio: The ratio between the value of the Synths a user holds and the value of the deposited SNX token. To prevent users from taking excessive risks, they must deposit enough SNX tokens to support their Synths.
- SNX Token: The native cryptocurrency of the Synthetix ecosystem. It is used as collateral to create and trade synthetic assets and as a reward for users staking SNX tokens.
- Staking: Synthetix uses a Proof of Stake consensus algorithm to ensure network security and decentralization. Users can stake SNX tokens to participate in staking and are rewarded with SNX tokens for their contributions to the network.
The Synthetix ecosystem
The Synthetix ecosystem provides a comprehensive set of tools and functionalities to make trading synthetic assets secure and straightforward. What players and components are active on the network?
- Synths: The synthetic assets on the Synthetix platform. Synths are ERC-20 tokens that track the value of specific underlying assets, such as fiat currencies, cryptocurrencies, commodities, and stocks. Synths are issued by the network and can be traded on decentralized exchanges.
- Stakers: Those who stake SNX tokens as collateral to issue and trade synths. Stakers are rewarded with SNX tokens for their contributions to the network and for maintaining system stability.
- Oracles: Entities that provide price feeds of the underlying assets for synths. Oracles ensure that synth prices are accurately reflected and are determined by various external sources, such as price feeds from central exchanges.
- Synthetix DAO: The decentralized autonomous organization responsible for governing and developing the Synthetix protocol. The Synthetix DAO consists of SNX stakers and decides on key aspects of the protocol, including protocol changes and the addition of new synths.
- SNX Token: The native cryptocurrency of the Synthetix ecosystem. It is used as collateral to issue and trade synths, maintain system stability, reward stakers for their contributions to the network, and vote within the Synthetix DAO.
- DApps: DApps on the Synthetix platform utilize Synthetix's synthetic assets and offer various applications, such as decentralized exchanges and financial instruments.
Benefits of Synthetix
What are the advantages of Synthetix that attract cryptocurrency traders?
- Real-time prices thanks to the oracle system.
- No physical ownership of assets required for trading.
- A diverse range of DeFi options.
- Highly innovative DeFi project.
- Benefits from Ethereum's security protocols.
Drawbacks of Synthetix
What drawbacks of Synthetix should investors in the token consider?
- Dependence on external sources of information.
- Relatively limited liquidity.
- Dependence on developments within Ethereum.
Who is the founder of Synthetix?
The founder of Synthetix is Kain Warwick, an Australian entrepreneur and technologist. Synthetix began as a protocol called Havven, which aimed to create cryptocurrencies that mimicked the performance of cash like the U.S. dollar or the euro on the blockchain.
In late 2018, Havven rebranded as Synthetix, expanding its objectives to include synthetic assets for cryptocurrencies and commodities.
In 2025 experts expect a minimal price of €11.27 and a minimal price of €37.25 in 2030.
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