What Is Synthetix (SNX)?
Also known as: SNX, Synthetix Network, Havven, Synthetix Protocol
In short
Synthetix is a decentralized derivatives protocol running on Ethereum and Layer 2 networks in which users lock SNX tokens as collateral to provide liquidity to synthetic assets and derivatives markets; its native token is SNX.
Synthetix started in 2018 under the name Havven and was soon renamed. In the protocol's original model, SNX holders lock their tokens as collateral to mint synthetic assets called 'synths', such as sUSD. Synths track the value of the dollar, gold or other cryptocurrencies using prices taken from oracles; users can buy and sell these assets without owning the underlying asset. Because SNX's price is volatile, the collateral ratio is kept high.
In this model, those who stake SNX jointly assume the system's total debt and in return receive a share of trading fees and rewards. Synthetix's product structure changed several times over the years; for a period, the protocol positioned itself as a liquidity and infrastructure layer for perpetual contract exchanges and other derivatives applications built on top of it, and was heavily used on Layer 2 networks such as Optimism.
The protocol's risks are complex. In the shared debt pool model, because stakers' debt changes with synth holders' profits and losses, unexpected losses can occur. Oracle errors or price manipulation can cause synthetic assets to be mispriced; in the protocol's history, there has been an incident in which an erroneous price feed led to problematic transactions. Risks arising from smart contracts and governance decisions are added to these.
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