Content
In this article, let's talk about Synthetix, a special existence in the DeFi project on Ethereum. Synthetix is a synthetic asset protocol platform. It can be said that if you understand Synthetix, you can understand 99% of DeFi projects.
Because Synthetix belongs to the most difficult level of Ethereum smart contracts in terms of project complexity and token model design.
Mirror world created for assets
Synthetix is a platform for building, trading, and destroying synthetic assets (Synths), but what the hell is synthetic assets? Perhaps the first time you hear this concept, you will have this question.
In a word, synthetic assets simulate the prices of other assets so that people can directly trade on the blockchain.
In the traditional asset trading market, we can buy and sell stocks, real estate, precious metals or bulk commodities. However, in the current stage of DeFi's world development, we don't have a direct way to trade assets such as stocks, precious metals, and commodities. What should we do?
At this time, some project parties put forward the concept of synthetic assets: Just like derivatives in traditional financial markets, can these trading objects be anchored to create a type of virtual assets that can directly represent these traditional trading markets on the blockchain , To copy their prices, so as to achieve on-chain transactions? This is the origin of synthetic assets.
Synths is a mirror image simulation of the target asset. For example, use sUSD to represent the price of US dollars, sGold to represent the price of gold, and sSP500 to represent the S&P 500 stock index. Even the encrypted assets themselves can also become anchors, using sBTC to represent BTC and sETH to represent ETH.
Can these synthetic assets be exchanged for corresponding anchors one-to-one? Here, anchors refer to assets such as stocks, gold, and commodities. At least at this stage, what the synthetic asset has done is just copy the price of the anchor, so that people can directly trade these virtual assets on the chain, and cannot convert gold synthetic assets (such as sGold) into one-to-one. Gold in kind. However, there are also projects that are trying to do this, such as dForce.
Make everything tradeable on the chain
The story begins in 2017. Many project parties have worked hard around the concept of stablecoins and constructed them by collateralizing tokens to mint stablecoins. The Havven project is no exception. Kain Warwick founded Havven in 2017, and they created the stable currency nUSD.
But if the stable currency is regarded as a virtual currency anchored to USD, can the anchored object be expanded? For example, anchor stocks, anchor precious metals, or use cryptocurrencies such as BTC and ETH as anchor objects? After all, since the casting of stablecoins requires collateralized tokens, the same idea can also be used to cast other assets. After all, one of the core functions of these assets is trading. Why should it be limited to the stablecoin itself?
Following this line of thought, the Havven project team announced at the end of 2018 that it would transform and upgrade to Synthetix, from a stablecoin project to a protocol platform for synthetic assets. At the beginning of the launch, there were only six types of synthetic assets. Today, dozens of synthetic assets have appeared, including stock indexes, gold, BTC\ETH\EOS\LINK, etc., all of which have their own corresponding types of synthetic assets.
What can users do?
According to the official definition
Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. These synthetic assets (Synths) come from the mortgage Synthetix Network Token (SNX), and can be directly traded between each other using Synthetix smart contracts on the Synthetix.Exchange exchange.
One of the questions that readers may be most concerned about is: What can I do with SNX? Don't worry, let's quickly understand the two main functions of Synthetix:
The creation, management and destruction of synthetic assets are realized through Mintr, a dApp.
The transaction of synthetic assets is completed through the trading market Synthetix.exchange.
In the analysis report of http://Crypto.com, the entire process of casting, debt calculation, and synthetic asset trading is summarized as follows:
Creation of synthetic assets
In fact, Synthetix does not allow users to directly create all synthetic asset types, but is divided into two steps:
Through the Mintr platform (https://mintr.synthetix.io/), users over-collateralized Synthetix platform tokens --- SNX (Synthetix Network Token) as collateral, can mint sUSD stablecoins. The current standard mortgage rate is 700%, which means that only 7 USD worth of SNX can be mortgaged to create 1 USD of sUSD. This design is because, after all, SNX does not have such a strong value consensus, setting a high mortgage rate to reduce the risk of insufficient collateral value.
Use the minted sUSD stablecoin to trade synthetic assets on Synthetix's trading platform (Synthetix.exchange). In fact, the process of sUSD purchasing synthetic assets is also the process of casting such synthetic assets. At this time, sUSD is destroyed and the corresponding synthetic asset is created.