Synthetix (SNX) – All you need to know

What is Synthetix?

Synthetix is two things: a cryptocurrency exchange, and a facility for users to ‘mint’ their own virtual tokens on the Ethereum blockchain. The newly minted tokens are known as ‘synths’, while SNX is the platform’s native token.

Users can create their own assets on Synthetix. These synths are linked to the value of what users choose them to represent in the real world, and they can then be traded on the Synthetix Exchange. Users can gain exposure to any asset in virtual form, including synth currencies like sUSD (USD), synth cryptocurrencies like sBTC (Bitcoin), synth stocks like sTSLA (Tesla), and synth commodities like sAu (gold).

The real advantage of Synthetix is that it allows users to gain exposure to any investment class they want without having to sign up to a centralised body. The platform is designed to make investing flexible and accessible for all, and investors can even take up a short position by using an ‘inverse synth’ like iBTC, which will gain value when Bitcoin (BTC) falls in price.

How does Synthetix work?

Synthetix works by using cryptocurrency as a means to make investing and trading more accessible and convenient. The Ethereum-based exchange is an ecosystem populated with user-created synths that track the price of their real-world representation by using something called Chainlink.

Synths are exchanged within the Synthetix Exchange: a peer-to-peer marketplace that combines the best components of cryptocurrency – decentralisation and flexibility – with a robust platform that has familiar exchange mechanisms and market dynamics.

To ensure the platform remains liquid, Synthetix incorporates a staking mechanism that rewards users for staking SNX tokens to provide liquidity to the exchange. Synthetix also tries to prevent the marketplace from becoming unstable, because to mint a synth, users must stake 750% of the worth of their synths in the form of SNX. This acts as a buffer against major market price swings.

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