Synthetix is a protocol for issuing and trading synthetic assets based on the Ethereum blockchain. These are financial instruments with collateral in the form of ERC-20 smart contracts (called "Synths"), which replicate the dynamics of the underlying asset without the need to directly own the asset. The project features allow positive Synthetix Network price predictions.
The project supports synthetic assets for commodities such as gold, silver and oil, stocks, tokens and coins; inverted cryptocurrencies (which give you the ability to short the underlying asset), various indices and fiat. If this is too complicated for you, follow the XDC network live price chart at letizo.com.
The main benefits of making optimistic Synthetix Network price prediction
- The platform opens access to more sophisticated and advanced trading and investment strategies in the crypto market
- The collateral pool model gives users the ability to convert synthetic assets directly through a smart contract, without the need for third-party involvement
- The collateral pool mechanism also solves the lack of liquidity and slippage problems inherent to DeFi.
Operating principle, architecture — what affects Synthetix Network token price
There are three main differences from most DEX:
- Traders trade with the combined pool of the entire project community, not any particular counterparty.
- Traders buy and sell synthetic assets; the price is linked to the underlying assets using data from offchain oracles.
- Traders have easy access to derivatives and various investment baskets.
The project is an infrastructure of smart contracts combined with a set of incentives that keep the prices of synthetic assets at the right level. Each synthetic asset issued in the system is an ERC-20 token that tracks and recreates the price of the underlying asset. Therefore, Synthetix Network token prices have a good future.
The fundamental tool for the system's operation is the SNX token, which acts as collateral to issue sUSD, with which other synthetic assets can be traded.
Users who stack SNX receive rewards in the form of a proportional share of commissions for trading synthetic assets. Thus, the value of SNX is directly related to the activity taking place in the system.
SNX token as collateral:
- Synthetic assets are issued when users place collateral in SNX tokens in the decentralized Mintr app (the app is currently integrated).
- The collateral level (C-ratio) was originally 750%, meaning that to issue, for example, $100 worth of sBTC, a user had to deposit $750 worth of SNX. However, during the voting process, SCCP 41's proposal was passed, lowering the C-ratio to 600%.
- To exit the system, users must repay the debt by burning previously issued synthetic assets and thereby releasing their SNX tokens from the pledge.
Incentives for SNX holders (commission payments are only made to those whose collateral level is at or above 600%) force them to maintain C-ratio at an optimal level. This provides enough collateral in the system in the event of significant price fluctuations.
Conclusions
One of the main advantages of the project is the wide diversification of crypto asset trading options and providing a high level of liquidity, accessibility to all users and no slippage even in large synthetic asset trades.
The platform can create quite a massive market on the Ethereum blockchain. The project began its development in the DeFi sphere and became one of the pioneers of this field. This suggests that the project is more of a trend creator. But you can also consider XDC network price prediction as an investment tool.
Initially, the project was centrally managed to provide the most efficient development in the early stages. But over time, the project is becoming less centralized and management is being handed over to a lot of decentralized autonomous organizations (DAOs), which is a significant plus to increase trust from the community and users.
The trend of increasing trading volumes on DEXs and the steady growth of TVL (Total Value Locked) in various DeFi-protocols indicate that the platform has chosen the right vector of development. Therefore, the growth of demand for the project's products in the future will be to a large extent provided by the continuation of these trends. The project has all the chances to be among the leaders in its derivatives trading segment.