Synthetix (previously known as Havven) is designed by engineers to build a decentralized and trustless network. The Synthetix Network Token (SNX) supports a range of synthetic assets, including: fiat currencies pegged to the US dollar, precious metals, indices, and even other cryptocurrencies.

Project Predecessor

The predecessor to Synthetix was Havven, established in 2017, consisting of a distributed payment network and a stablecoin.
Initially, Havven used a dual-token system to minimize price volatility: one was a stable token called Nomin, denominated in fiat currency to maintain price stability (pegged to the US dollar), serving as the medium of exchange. The other was a reserve token named Havven, which acted as collateral for the system with a fixed supply, and its market capitalization reflected the total value of the system.
By the end of 2018, Havven was working on issuing "multi-currency" stablecoins, such as the Euro and British Pound. At this point, the team realized that the Havven system had the potential to introduce multiple assets, including synthetic cryptocurrencies (long and short positions), indices, and derivative assets like stocks. Consequently, the team rebranded to Synthetix and pivoted from a stablecoin project to a synthetic asset issuance protocol.
Before officially renaming to Synthetix, Havven disclosed two funding rounds:
In September 2017, Havven announced it had secured $250,000 in seed funding.
In March 2018, Haven raised $30 million through private and public fundraising.
The investors names were not disclosed in either round.
On October 28, the Synthetix Foundation announced that Framework Ventures had purchased 5 million Synths (SNX) from the Synthetix Foundations treasury for approximately $6.3 million. Synthetix further stated that several institutions had also bought "significant" amounts of SNX tokens, but did not disclose their names.
The Synthetix team is based in Australia, with Kain Warwick as the founder and CEO. Previously, he served as CEO at Blueshyft, a digital payment provider in the crypto space, which has 1,250 locations across Australia and handles millions of dollars in transactions daily through its iOS platform, becoming the largest cryptocurrency payment channel in Australia.
Recently, in an interview with DeFi Labs, Kain expressed that decentralized on-chain derivatives trading has limitless potential in the future, and Synthetix aims to become the next BitMEX.

How the Project Makes Money

1. Purchase SNX for Collateral
Currently, the main channels for purchasing SNX are Uniswap, Kyber, and KuCoin. According to data from CoinGecko, the highest trading volume is for the SNX/ETH pair on Uniswap, while KuCoin accounts for less than 20% of circulation. Most players choose to swap ETH for SNX on Uniswap.
2. Mint Synthetic Asset sUSD
After acquiring SNX, users can use Mintr (https://mintr.synthetix.io/) to stake SNX tokens and generate the synthetic asset sUSD.
sUSD acts as your chips for trading on Exchange.synthetix. You can mint sUSD by staking SNX or directly purchase sUSD on Uniswap.
Due to the potentially higher volatility of SNX compared to ETH, Synthetix requires a 750% over-collateralization to generate the stablecoin sUSD. This means that only when reaching the 750% target threshold do users have the opportunity to earn trading fees and new SNX token rewards.
This ultra-high collateralization incentive mechanism ensures that the collateral supporting synthetic assets can withstand significant price fluctuations. It also encourages collateralizers to increase their collateral ratio by depositing more SNX or destroying synthetic assets.
SNX rewards are similar to staking issuance rewards. According to data from StakingRewards.com, the current collateralization rate for Synthetix is 85.16%, with a collateral reward of 54.92%, which is relatively high.
Trading fee dividends are generated from the trading fees produced when users trade on Exchange.synthetix, with 0.3% of each transaction fee allocated to the dividend pool and distributed among collateral holders.
During the minting process, users incur new debt (the value of the newly minted synthetic assets), which is stored in XDR (Synthetix Drawing Rights). XDR uses a basket of currencies to stabilize the value of the debt, similar to the International Monetary Fund’s Special Drawing Rights (SDR). The prices of these synthetic assets fluctuate based on oracle prices, making the debt variable.
(Noted by Odaily Planet Daily: Special Drawing Rights can be used to repay debts to the International Monetary Fund and offset international balance-of-payments deficits between member governments. Its value is determined by a basket of reserve currencies comprising the US dollar, euro, renminbi, yen, and pound sterling.)
Once the debt is assigned to collateralizers, the Synthetix smart contract issues new synthetic assets, adds them to the total supply, and allocates them to user wallets. Since synthetic assets are over-collateralized with SNX, they have a target threshold of 750%. If the value of SNX increases, SNX can be correspondingly unlocked, or more synthetic assets can be issued.
3. Trade Synthetic Assets
This step is completed on Exchange.synthetix, allowing you to exchange sUSD for any asset on the platform, enabling trading (going long or short) of cryptocurrencies, commodities, and fiat currencies.
For example, if you are bullish on BTC, you can buy sBTC (or iBTC if bearish). When the price of BTC rises, the price of your sBTC will also rise, and you can sell it directly on the Exchange.synthetix market.
Interestingly, trading in synthetic assets primarily involves interacting with smart contracts, without order books or counterparties. Instead of buying iBTC, the entire "debt pool" bears the risk. The debt pool can be understood as a pool of all synthetic assets, which changes with the price fluctuations of synthetic assets.
For the system, asset trading simply swaps debt from one synthetic asset to another, without an order book or matching orders. Thus, users dont need to worry about liquidity issues.
However, the risk is shared by all in terms of the value fluctuations brought about by the debt pool. Even if you hold sUSD, you may still lose money when the debt pool changes.
Since token prices are obtained off-chain through oracles, currently operated by the Synthetix team, this poses a risk for users.
4. Liquidate Debt
When SNX collateralizers want to reduce their debt or exit the system, they must first liquidate synthetic assets.
For instance, a collateralizer generates 1,000 sUSD by staking SNX. To unlock the staked SNX, the user must first liquidate 1,000 sUSD. If the debt pool changes during the staking period (and thus personal debt also changes), the user may need to liquidate more or fewer sUSD to extinguish their debt.
The liquidation process is also executed via smart contract. The Synthetix smart contract determines the users sUSD debt balance, removes it from the "debt ledger," and liquidates the corresponding sUSD, updating the users wallet balance of sUSD and the total supply of sUSD. Afterward, the SNX is successfully unlocked.
Understanding how to make money on Synthetix, lets look at the earnings. Synthetix distributes dividends every Wednesday. A major SNX holder staked 33,000 SNX tokens and now earns a weekly trading reward of 115.48 SNX (approximately 956 CNY), and a weekly new token reward of 328.94 SNX (approximately 2,724 CNY). In total, staking 33,000 SNX results in a weekly dividend of 3,680 CNY. For this major holder, the cost per SNX is less than 4 CNY, and the current price of one SNX is 8.28 CNY. In summary, the more SNX you stake, the higher your debt, and the greater your weekly SNX dividends.
Many domestic investors are accustomed to purchasing SNX on Uniswap, but due to factors like network latency and lag, transactions can sometimes be less smooth. Now, SNX can also be purchased on the domestic exchange KuCoin.

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