• Synthetix protocol has reached $1 billion in total value locked (TVL). 
  • Synthetix (SNX) offers trading between synthetic assets, aka “Synths.” 
  • Synths are created by using SNX tokens as collateral.

Decentralized finance (DeFi) platform Synthetix (SNX) has recently surpassed $1 billion in total value locked (TVL). Having made significant gains in 2020, SNX’s price reached an all-time-time of $7.32 on August 15 and rallied over 400% year-to-date.

Synthetix is a decentralized exchange (DEX) built on Ethereum through a series of smart contracts. However, the protocol does not facilitate trading between digital assets (typically ERC-20 tokens) and stablecoins, but rather between synthetic assets, aka “Synths.” 

Fiat currencies (sUSD,sEUR), digital assets (sETH, sBTC) and commodities like gold (sXAU) can be directly traded on Synthetix exchange. Another unique feature of Synthetix is creating and trading Synth tokens that track the price of assets inversely (iUSD, iETH, iXAU, etc). 

Synth tokens are typically created by using another asset as collateral. Notably, instead of using the underlying asset (like xBTC or USDT), the protocol’s native SNX token is used. In other words, users must stake SNX tokens at a 750% collateralization ratio through the DEX’s Mintr smart contract to create new Synths. 

Users can also obtain Synths by borrowing it or through another DEX. Those staking SNX tokens are incentivized with staking rewards. In addition to staking rewards, SNX stakers receive Synth exchange rewards generated by the exchange’s fees. This could be a significant factor in the rapidly growing market cap and value locked figure.

SNX/USD daily chart

SNX/USD daily chart

SNX/USD buyers have stayed in control of the third straight day market and are presently priced at $7.46. The price is hugging along the upper curve of the 20-day Bollinger Band. The moving average convergence/divergence (MACD) shows increasing bullish momentum, while the RSI looks to peek into the overbought zone. As such, the overall market sentiment for SNX is bullish. The price shows healthy support levels at $6.917 and $6.514.
 

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