What is Synthetix?

Synthetix is a derivatives liquidity protocol on Ethereum. It enables the creation of synthetic assets (Synths) by staking SNX, and these Synths can be traded for each other directly with the Synthetix smart contracts on dApps such as Kwenta.

Why stake SNX?

SNX stakers receive two kinds of rewards. Firstly, they receive SNX staking rewards, which are created through the inflationary monetary policy. Secondly, there’s Synth exchange rewards, which are denominated in sUSD and generated by all peer-to-contract Synth trades.

Minting & Burning

All Synths need to be backed by staked SNX at a Target Collateralisation Ratio, configurable by community governance. SNX stakers need to manage their own ratio to be above this figure, which they can do by burning sUSD to increase their ratio or minting sUSD to reduce it. If they do this, they can collect weekly rewards.

What are the risks?

All SNX stakers create a ‘debt’ when they stake. Their debt begins as the amount of sUSD they initially mint, and fluctuates according to gains or losses made by other Synth holders. Any time anyone holds a Synth that appreciates in value, that gain is distributed proportionally between all the staked SNX holders’ debts. A staker must pay off their debt before they can unlock their staked SNX.