DeFi Token Economics

SNX Token – Why to stake SNX

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Synthetix is one of the best known DeFi projects in the world. It is a decentralized open-source exchange, developed on the Ethereum network and permanently present in the top 3-5 positions of the ranking provided by DefiPulse. We published a review about it a few months ago but today we will deal with the token that revolves around this great project: SNX. First, there was an ICO where about 30M USD were collected for a total of 100M tokens. Later, however, the team changed its monetary policy, increasing the supply to incentivize SNX staking. 

Today SNX is a very strong token in the top 100 of CoinMarketCap, currently trading at around $1.44 (June 22nd, 2020). This price places it at number 36 on the CMC list with a total market cap of about $270 million. The supply at the moment is about 187M of SNX. The volumes of the last 24 hours are high, we are talking about figures above 7M USD. Let’s see why it is better to hold SNX and have faith in this project!

SNX as collateral

The Synthetix exchange allows creating synthetic assets and swapping them with each other. These assets are called Synths and the official token of the project, called Synthetix Network Token or SNX for short, is used as collateral. The collateralization ratio is obviously very high and at the moment the minimum is 800%. This figure could become higher or lower over time, although for any changes there will be a vote (the governance mechanism, a mechanism that all DeFi projects are adopting). But what does this percentage represent? It is simply the dollar value of the locked SNX compared to the value of the Synths created. So if we create an asset worth 1000 dollars, the collateral in SNX must be worth at least 8000 dollars. 

SNX Stakers then go into debt when they create new Synths and to unlock their tokens they will have to pay back that debt by burning the Synths. For some time now the team has been trying to use ETH as collateral and in this case, the collateralization percentage is lower, i.e. 150%. However, this second option is not recommended because it does not take advantage of the pooled debt aspect of the system and several advantages are lost. For example, when using ETH as collateral, it will not be possible to receive rewards or part of the exchange fees. Instead, by using SNX, users will receive these rewards and they will keep on earning (the more SNX they hold, the more they will earn).

Why stake SNX

The first reason to stake SNX is the return from the Synthetix exchange. Every time someone performs trades, they generate fees which on average are 0.3% (0.1% to 1%). These fees are then sent to a specific pool and redistributed among all token holders. The gains will of course be proportional to the SNX tokens staked. The more of them, the better! Stakers can claim these rewards weekly. 

The second reason for believing in the SNX project is called SNX Staking Rewards. The token inflation rate will be reduced year after year and by August 2023 the supply should be 260,263,816 M tokens. These new tokens generated will be distributed to token stakers on a weekly basis as long as their collateralization ratio never falls below the set minimum (800% at the moment). After 2023, precisely from September, the inflation rate will be 2.5%. There will therefore be fewer and fewer tokens to try to improve the price in the future. 

Where to buy SNX

SNX tokens are tradable on several centralized and decentralized exchanges. The best volumes are currently on CoinEx, KuCoin, Poloniex and Hoo. As far as DEXs are concerned, SNX can also be traded on Kyber Network or Uniswap. But in those two cases, the volumes are almost 0, so we recommend that you be careful not to pay for unnecessary surpluses. 

Compound (COMP) $ 144.59
Maker (MKR) $ 457.27
Synthetix Network Token (SNX) $ 4.26
Aave (LEND) $ 0.505094
Kyber Network (KNC) $ 0.939804
0x (ZRX) $ 0.382891
Band Protocol (BAND) $ 6.06
REN (REN) $ 0.203539
Ampleforth (AMPL) $ 0.726903
Loopring (LRC) $ 0.241301
Thorchain (RUNE) $ 0.377610
Balancer (BAL) $ 14.69
Bancor Network Token (BNT) $ 0.780344
Kava (KAVA) $ 2.04
Augur (REP) $ 14.47
Tellor (TRB) $ 20.91
pNetwork (PNT) $ 0.595771
Meta (MTA) $ 2.66
Melon (MLN) $ 30.29
Curve DAO Token (CRV) $ 1.09