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Synthetix

Synthetix is a new financial primitive enabling the creation of synthetic assets, offering unique derivatives and exposure to real-world assets on the blockchain.
Category
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Finance
Blockchain
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Ethereum, Optimism
Currency
?
SNX
Publisher
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Synthetix Team
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What is Synthetix?
Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum and Optimistic Ethereum (a layer two scaling solution built on Ethereum). These synthetic assets are collateralized by the Synthetix Network Token (SNX) which when locked in the contract enables the issuance of synthetic assets (Synths). This pooled collateral model allows users to perform conversions between Synths directly with the smart contract, avoiding the need for counterparties. This mechanism solves the liquidity and slippage issues experienced by DEX’s. 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 pro-rata portion of the fees generated through activity on Synthetix from integrators (Kwenta, Lyra, Curve, dHEDGE, and many others). It is the right to participate in the network and capture fees generated from Synth exchanges, from which the value of the SNX token is derived. Trading on the Synthetix infrastructure does not require the trader to hold SNX.

The Synthetix Protocol
A suite of smart contracts that provisions liquidity with the input of Synthetix Governance to enable various financial derivative products.

The Synthetix Staking Interface
A web interface that allows for easy interaction with Synthetix Staking and other synthetix products

Synthetix Governance
A representative council system that governs Synthetix. Four staker-elected councils exist Spartan, Treasury, Ambassador, and Grants Council.

Synthetix Partners & Integrators
Protocols listed under the Synthetix Partners and Integrators section have integrated with Synthetix products and liquidity to build user-facing protocols for varying use cases.

The Greater Synthetix Ecosystem
Many additional protocols have spun out of the Synthetix Community or have very close relationships with Synthetix. While these protocols do not directly integrate with Synthetix liquidity, they are closely intertwined with Synthetix.

Staking
SNX Stakers earn weekly rewards for collateralizing the network. These rewards are paid in two ways. One is from trading fees, which are charged to traders. The other is inflationary rewards, which are newly minted SNX tokens held in escrow for a year. Escrow-locked SNX tokens can be staked during this escrow and provide further rewards to stakers.

Benefits of Staking
Stakers earn weekly rewards for collateralizing the network. These rewards are paid in two ways. One is from trading fees, which are charged to traders. The other is inflationary rewards, which are newly minted SNX tokens held in escrow for a year. Escrow-locked SNX tokens can be staked during this escrow and provide further rewards to stakers.

Risks of Staking
The rewards stakers earn are not risk-free. The staker is providing collateral for traders to trade against. If traders are profitable, net of fees, stakers profits may decrease. Additionally, smart contract risk, oracle risks, and other risks are also present when providing collateral and using Synthetix. Please operate at your own risk and do your own research.

Minting, burning, and the C-Ratio
The mechanisms above ensure SNX stakers are incentivized to maintain their Collateralisation Ratio (C-Ratio) at the target rate. This ensures the Synthetix protocol is backed by sufficient collateral to absorb large price shocks. If the value of SNX, each staker’s C Ratio will fluctuate. If it falls below the target c-ratio (with a small buffer to allow for minor fluctuations), they will be unable to claim fees until they restore their ratio. They adjust their ratio by either minting Synths if their ratio is above the target c-ratio or burning Synths if their ratio is below the target c-ratio.

Stakers, debt, and pooled counterparties
SNX stakers incur a ‘debt’ when they mint Synths. This debt can increase or decrease independent of their original minted value, based on the exchange rates and supply of Synths within the network. For example, if 100% of the Synths in the system were synthetic Bitcoin (sBTC), which halved in price, the debt in the system would halve, and each staker’s debt would also halve. This means in another scenario, where only half the Synths across the system were sBTC, and BTC rises 50%, the system’s total debt—and each staker’s debt—would increase by one 25%. In this way, stakers act as a pooled counterparty to all Synthetix Network exchanges; stakers take on the risk of the overall debt in the system. They have the option of hedging this risk by taking positions external to the system. By incurring this risk and enabling trading on Synthetix stakers earn a right to fees generated by the system.

Synthetix Oracle Contracts
At Synthetix, the on-chain manifestation of the oracle is the ExchangeRates contract, which stores prices that are frequently updated by the oracle. The primary user of these prices is the Synthetix contract, which needs them to calculate debt allocations when issuing and burning synths, and to determine the correct quantity of synths when performing an exchange of one flavour for another.
Information
Type
Automated Market Maker
Blockchain
Ethereum, Optimism
Currency
SNX
Platform
Windows, Android, macOS
Windows, Android, macOS
Publisher
Synthetix Team
Version
v2.74.1
FAQ
If you have an sUSD debt, but you have no sUSD in your wallet, then you must have done one of the following:
Transferred it to another wallet
Transferred it to a centralized / decentralized exchanged and sold it
Burned sUSD in the past to raise your C-Ratio
Exchanged it into another Synth / opened a futures position / etc.
To unlock your SNX, you must acquire the amount of sUSD under Debt in the Synthetix Staking dapp. If you transferred it to another wallet or an exchange, you will need to transfer it back into the wallet that contains your locked SNX. And if you sold the sUSD, you must buy it back.
If you are unable to acquire enough sUSD, you can also self-liquidate under the new liquidation mechanism.
You can purchase sUSD easily from Curve or Uniswap.
Once you've paid back your sUSD debt, your SNX will be unlocked and able to be transferred. Note - Your escrowed SNX will not be unlocked until it is fully vested.
When you 'claim' in the Rewards tab on Staking dAPP you are assigned your % of SNX in an escrow record in the RewardEscrow Contract. Your rewards will not show in your wallet address but they are assigned to your wallet address to be vested in 12 months from their claim date.
You will now be able to mint from those escrowed SNX as they are also used as your collateral. So mint away if you can and compound your next weeks SNX rewards.
If you try to send more SNX than is transferrable, the transaction will fail.

In the Staking dapp, if you go to the mint page it will show you how much of your SNX is transferrable and how much is in escrow.
To unlock your locked (staked) SNX, you need to 'burn' the sUSD active debt you owe. Go to the burn section of the Synthetix dapp to unlock SNX.
There are several centralized and decentralized exchanges where you can buy SNX. View the centralized markets on CoinGecko
When you stake SNX and mint sUSD, you create a 'debt,' which is how much sUSD you need to burn to unlock your SNX again. Your debt represents a proportion of all the debt in the system. Whenever someone makes a gain through Synths, they make it against all the debt in the system.
Therefore, if the system debt increases, your debt will proportionately increase as well. When you mint sUSD, the Synthetix smart contract will work out how much debt you represented in the network at the time you joined.

For example, if you minted $1000 sUSD and the total sUSD value of all Synths in circulation is currently $1 million, your debt ratio owed to the network is 0.1%. However, as the total sUSD value of Synths increase (such as when sBTC or sETH increase in value), your debt ratio owed to the network remains constant at 0.1%.
Imagine if total sUSD value of all Synths suddenly doubles due to price increases in Synths such as sBTC or sETH, and now gets to $2 million, you will need to repay $2000 sUSD in order to unlock all your SNX. Why does this happen? This is because every staker needs to share the debt in proportion to their initial ratio so that the monetary policy balances out.
There is no free money created out of thin air. Every sUSD gain generates a corresponding debt value.
There are three ways to increase your C-Ratio:
Burn some sUSD to clear some of your debt.
Stake additional SNX.
Wait for the price of SNX to increase.
If you've staked your SNX, you might have noticed that the number of staked SNX in your wallet can change. This is due to fluctuations in the SNX price and account active debt.
Synthetix, an Ethereum-based exchange and synthetic assets platform, is one of the first DeFi applications
You are blocked from claiming rewards because your Collateralisation Ratio is below the target c-ratio. To increase your Collateralisation Ratio, you'll need to burn enough sUSD to get your Collateralisation Ratio above the target c-ratio.
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