Users of Synthetix have the option to buy coverage policies directly from the "Prime dApps" diversified cover pool, which is available on the Neptune Mutual marketplace. Moreover, users can receive stablecoin rewards by providing liquidity to the Prime dApps pool, which comes from the policy fees paid by other cover buyers. This groundbreaking approach to DeFi Insurance cover provides Synthetix V2 users with the option of purchasing cover policies or providing liquidity to the Prime dApps cover pool.
What Is Synthetix?#
Synthetix is a DeFi protocol built on the Ethereum and Optimism mainnet. It is a decentralized liquidity provisioning mechanism used by a number of projects in its ecosystem, including Kwenta, Lyra, Curve and 1inch.
The Synthetix protocol issues synthetic assets using SNX (the native token of the protocol), ETH, and LUSD as collateral. Synths track the price of another asset without requiring the holder to actually own that asset. Synths are ERC-20 smart contracts that can be traded on Kwenta, Synthetix’s decentralized exchange (DEX).
What Makes Synthetix Unique?#
Synthetix is unique because it provides on-chain exposure to non-blockchain assets that are normally inaccessible to crypto investors. It lets users trade a wide range of synths that include cryptocurrencies, indexes, inverses, and RWAs (real-world assets) like gold. Unlike tokenized commodities, such as Paxos’ PAX Gold, where ownership of the underlying asset is transferred, synths do not provide ownership of the underlying asset. Synths are used to facilitate price discovery, hedge against volatility, and build mature markets.
Synthetic also offers decentralized perpetual futures contracts, or “Perps”. Synthetic futures contracts use put and call options with the same strike price and expiration date to simulate a traditional futures contract. In simple terms, Synthetix perpetual contracts are synthetic futures contracts that allow traders to speculate on the price of an underlying asset without actually owning it. The value of these contracts is derived from the value of the underlying asset, and they can be traded on Synthetix's decentralized exchange.
Financials#
Synthetix’s financial model is distinctive because it uses staked SNX tokens to collateralize synths, with a collateralization ratio of 600% which is determined through community governance. SNX stakers can also earn staking rewards denominated in SNX and exchange fees from all synth trades denominated in sUSD. This linking of rewards to the collateralization ratio ensures that synths are always sufficiently backed by collateral.
The token’s primary function is to collateralize synths, but it also plays a critical role in the governance of the protocol. SNX holders can participate in decentralized decision-making and vote on proposals to determine the future direction of the protocol. The SNX token is trading at approximately $3.14.
Security#
Synthetix has been audited multiple times by several reputable firms, and the code is open-source, enabling community members to verify the security of the protocol. Synthetix also has an insurance fund that covers losses in the event of a smart contract exploit. Additionally, Synthetix has a bug bounty program, which rewards community members who discover vulnerabilities in the protocol.
In conclusion, Synthetix is a DeFi protocol that enables the creation of synthetic assets, or synths that track the price of another asset without requiring the holder to actually own that asset. Synths are used to facilitate price discovery, hedge against volatility, and build mature markets. The protocol uses staked SNX tokens to collateralize synths and rewards SNX stakers with staking rewards and exchange fees. SNX holders can participate in decentralized decision-making and vote on proposals to determine the future direction of the protocol. Synthetix has undergone multiple audits, has an insurance fund, and has a bug bounty program, ensuring the security of the protocol.
Synthetix on Social#
Users can connect with members of the Synthetix community through the following social channels:
Twitter | Discord | Github
