SNX Price Update
The price of Synthetix Network Token (SNX) today is $5.0260 USDT, which has decreased by -0.685729 (-12.01%) over the last 24 hours. The total number of SNX coins in circulation stands at 106,720,467 and $5,537,284 USDT has been traded for the SNX/USDT pair across exchanges over the last 24 hours.
About Synthetix Network Token
Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. The protocol allows anyone to issue a range of synthetic assets including fiat currencies, commodities, equities, and crypto assets (long and short).
For those unfamiliar, a synthetic asset is an asset (or basket of assets) that has the same value and price movement as another asset. Within Synthetix, these synthetic assets track the value of an underlying asset and allow investment exposure to an asset (i.e. Tesla stock) without the need to hold it.
All of these synthetic assets, known as Synths, are collateralized by the Synthetix Network Token (SNX) to drive value and liquidity to the underlying assets. Synths are minted when SNX holders stake their SNX tokens as collateral. The system currently has a 750% collateralization ratio.
It is important to note that SNX takers incur a debt when they mint Synths. The debt can increase or decrease independently of the original minted value, based on the exchange rate and supply of Synths within the network.
For example, if 100% of the Synths in the system were synthetic ETH (sETH). A doubling in the price of ETH (sETH) would also double to debt in the system, doubling the debt for each staker.
Synthetix plays an important role within the Ethereum ecosystem as it creates a decentralized and permissionless protocol for anyone in the world with an internet connection to gain exposure to a range of financial assets, including US equities and stable fiat currencies.
The SNX token plays a crucial role in the issuance of synthetic assets. In order to issue a new asset, like a share of Apple stock, users must stake SNX at a collateralization ratio of 750%.
SNX holders are incentivised to stake their tokens and mint Synths via a handful of different incentive mechanisms. The primary way is through exchange rewards. Whenever someone exchanges one Synth to another on Synthetix.Exchange, the trade generates a 0.30% fee that is sent to the fee pool. SNX stakers have a pro-rata claim to the pool where rewards are distributed on a weekly basis. The other main incentivization mechanism is the protocol’s native inflation to SNX stakers. We’ll cover this in a later section.
Size of Weekly Fee Pool (Jan 19, 2020)
With that in mind, the driving demand-side factor within the Synthetix protocol and the SNX token is the demand for synthetic assets at large. As Ethereum continues to expand its reach, users from across the globe (especially in developing countries) may want exposure to the assets available on the platform. Synthetix is completely permissionless, meaning these users don’t have to undergo the high frictions of global financial regulations and can seamlessly gain exposure to assets across the globe.
As the demand for synthetic assets increases, the demand for SNX as collateral will increase in tandem as the underlying rewards via exchange fees will increase.
Back in March 2019, Synthetix community governance decided to implement a native inflation rate into the protocol to incentivize stakers. While the inflation rate was set to halve every year, the community determined that the risks associated with abruptly halving issuance rates may cause some severe repercussions to the system as a whole. Instead, the community decided to implement a smoother inflation rate to the protocol.
Between March 2019 and August 2023, the total SNX supply will increase 100,000,000 to 260,263,816, with the issuance rate decaying at a weekly rate of -1.25%. Once the SNX supply hits the threshold in August 2023, the protocol will shift the issuance rate to 2.5% terminal inflation in perpetuity.
SNX Value Proposition
Simply put, there’s one economic factor that will drive the value of SNX upwards: the demand for Synths/synthetic assets. The more Synths minted, the more trading occurs on Synthetix Exchange, and the higher the fee pool becomes which in turn increases the value of holding SNX.
As the value of SNX increases, the more Synths that are able to be created. If the SNX protocol is valued at $100M and the minimum collateralization ratio is 750%, the protocol can handle ~$13.33M in circulating Synths without falling below that collateralization ratio. In order for the network to expand its economic bandwidth for Synths, the value of SNX must increase. Ultimately, there’s a positive feedback loop built within the protocol which is entirely driven by the demand for synthetic assets.