Overview
Synthetix is a DeFi protocol that issues synthetic assets, called Synths, which track real-world prices and enable exposure to commodities, currencies, and indices on-chain. Launched in 2018, it pioneered the model of collateral-backed synthetic exposure. Its SNX token backs the system as collateral.
How It Works
Users stake SNX as collateral and mint Synths, which trade against the sUSD stablecoin in a continuous on-chain exchange. Prices are supplied by oracles, and the network of stakers collectively bears the risk of maintaining the peg. Synths can be traded without a counterparty, giving exposure to assets that may not have on-chain liquidity.
Token & Funding
SNX is both the collateral and governance token of the protocol, with stakers earning trading fees and SNX rewards. The system uses a debt pool where every staker shares proportional liability for the total synths issued. Governance adjusts collateralization ratios and supported synths.
Risks & Considerations
Synthetix carries oracle, collateralization, and debt-pool risk; if synths depeg or collateral drops, stakers can face losses. Trading exposure to real-world assets through synths involves both market risk and the protocol's structural risk. Users should understand the debt-pool model before staking SNX or holding synths.