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Friday, December 8, 2023

What is Synthetix and how does it work?

The crypto-world is a relatively new market and it seems everyday one news comes out after the other that a certain coin or cryptocurrency has blown the market and all the investors made a lucky bet on the winning horse. But it is not as easy as being lucky, that is for sure. The particular aspects of any coin have to be ascertained such as its value, the technology involved, its perceived use in the future, and how much room it has to evolve. Other secondary factors also play a huge role in determining the value of the coin that I am even hesitant in calling them “secondary”. Finally, there are also the big players who have a great say in the trajectory of the market as a whole.

How does Synthetix Operates?

Coming to the point in question without delving too far from our raised point, one of the coins that has been accused of blowing the market SNX coin under the Synthetix project. It is a decentralized protocol that issues assets over the Ethereum blockchain. Synthetix Network Token collateralizes the Synthetix assets and issues them through the help of a contract. This way the whole system avoids the use of counterparties.

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What this means is that Synths are derivative tokens providing exposure to a range of assets. They can be traded with infinite liquidity and zero slippage by leveraging the Synthetix protocol’s unique pooled collateral model. This means that Synthetix allows for permission less synthetic asset creation tied to the value of real-world assets such as fiats and bonds. Trades between Synths generate a small fee that is distributed to SNX collateral providers.

Price Movement

The idea sounds nice but on the practical side of things, SNX has also sustained itself quite well especially during the bullish run of Bitcoin earlier in the year where the coin reached its all-time high value of $28.77. Over the course of the year, there has been a constant increase of its value, from the lowest it being $2.48. Its current value is $10.14 at the time of writing of this article. The drop-off has been huge due to neg)ative market corrections because of the alarming global news i.e. the Evergrande scare, debt ceiling uncertainty,and most importantly, SEC Chair Gary Gensler’s the recent witch-hunt against DeFi. But investors should keep their hopes for this one. This is mainly due to the Synthetix having a solid and sustaining growth of network. Also, the witch-hunt of the SEC chairman is to come to a naught as decentralized autonomous organization (DAOs) governs many of these kinds of protocols.

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