Total Value Locked in DeFi Platform Synthetix (SNX) Exceeds $1 Billion
Editor's Note: This article comes fromCointelegraph Chinese (ID: CointelegraphChina), Author: ANTÓNIO MADEIRA, reprinted with authorization by Odaily.
Cointelegraph Chinese (ID: CointelegraphChina)
Cointelegraph Chinese (ID: CointelegraphChina)
After other DeFi protocols such as Compound and Aave, Synthetix has reached the $1 billion milestone in value locked. Synthetix (SNX) is one of many DeFi tokens that has seen solid gains in 2020, hitting an all-time high of $7.32 on Aug. 15 and is up more than 400% so far this year.
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SNX/USDT daily chart. Source: TradingView
Much of the hype for the 2020 altcoin season has focused on lending, liquidity, and yield farming in cryptocurrencies. However, Synthetix has been able to make strides in the DeFi space by providing crypto investors with access to the world of traditional finance. Synthetix is also the fourth-largest DeFi protocol by total value locked, according to DappRadar.
How does Synthetix work?
Synthetix is a decentralized exchange (DEX) built on the Ethereum blockchain through a series of smart contracts. However, instead of trading between tokens and ERC-20 cryptoassets like stablecoins, Synthetix offers trading between synthetic assets (Synths).
Synths are tokenized forms of other assets. Synths track the price of tokens known to investors in other traditional assets. Commodities and stocks can be traded directly on the Synthetix exchange. Examples include fiat currencies (sUSD, sEUR), cryptocurrencies (sETH, sBTC) and commodities like gold (sXAU).
Another unique feature of Synthetix is the ability to create and trade Synth tokens that backtrack asset prices (iUSD, iETH, iXAU, etc.). This makes Synths one of the ways to short an asset in a purely decentralized manner.
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With Synthetix, over-collateralization is required
This means that, in order to create a new Synth, users must stake SNX tokens at a collateralization rate of 750% via the platform’s Mintr smart contract.
While it might seem counterproductive to lock up $750 to get $100 of sUSD, users can also acquire Synths via another decentralized exchange or by borrowing it. Under the protocol's inflationary monetary policy, newly issued tokens incentivize those who stake SNX to do so.
Users will not only receive staking rewards, but SNX staking holders will also receive transaction fee sharing from the exchange. Therefore, community members are encouraged to provide liquidity to Synths and lock up their SNX tokens.
This creates scarcity and is likely a major factor in the rapidly growing market cap as well as the growing amount of value locked.
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DeFi connects investors with cryptocurrencies and traditional assets
