Synthetix: A Derivatives Liquidity Protocol in the DeFi Pulse Index

Leeron Hoory

Mar 10 | 5 min read

Synthetix: A Derivatives Liquidity Protocol in the DeFi Pulse Index

Synthetix (SNX) is an ERC-20 token released in 2018 as the governance token for Synthetix, a derivatives liquidity protocol. It is one of several tokens currently held within the Index Coop’s DeFi Pulse Index (DPI).

What is Synthetix?

Who created Synthetix?

Synthetix Governance & Tokenomics

Why is SNX included in DPI?

How can I buy SNX?

What is SNX?

Synthetix Network Token (SNX) is the native token for Synthetix, a decentralized exchange. Synthetix allows users to create synthetic versions of coins, crypto and other assets (synths) which are pegged to real world assets like the USD or EUR.

Investors can trade these synths on Synthetix’s autonomous network by connecting their Ethereum wallet, such as Metamask, without the need for third party facilitators. The prices of assets are updated in real time through Chainlink oracle data feeds.

Synths are notated with an “s” in front of the asset’s original name. Some synths minted on the Synthetix platform include sUSD, sEUR, sJPY, sAUD, sGBP, sCHF, sKRW and sBTC. Similar to derivative trading in traditional finance, owning a synth means a user is exposed to an underlying asset without owning it. For example, an investor could own sUSD on the Synthetix network pegged to the USD without owning USD.

Investors can also short prices by staking in inverse synths. Users will purchase inverse tokens which are labeled with an “i” in front of the original token name, such as iUSD or iBTC, which bet against the underlying asset. Synthetix also allows you to own a synthetic version of an asset that’s on a blockchain other than Ethereum, which can be helpful if you are only making trades on an Ethereum network but are interested in an asset outside of the Ethereum blockchain.

Users must stake SNX tokens in order to participate on the Synthetix network and the tokens are used as collateral to create synths. Holders of the SNX token are incentivized to stake their tokens through rewards and a percentage of the network trading fees.

Founded in 2018, Synthetix is one of the most established derivatives trading platforms in the DeFi ecosystem on the Ethereum network. Some competitors, such as Hedgic and dYdX are also decentralized exchanges, but have not been around as long (dYdX was established in late 2021 and Hedgic in late 2020).

Who created Synthetix?

Synthetix was founded by Kain Warwick. The protocol was originally called Haaven (HAV). At the end of 2018, Haaven rebranded to Synthetix, and added synthetic assets for cryptocurrencies and commodities. Warwick is also the Co-Founder and CEO of blueshyft, an Australia-based retail payment network and the largest payment gateway that processes cryptocurrency in Australia.

Synthetix Governance and Tokenomics

Holders of the SNX token are able to vote on and make proposals on the current and future parameters of Synthetix.

SNX’s initial supply of 100,000,000 tokens was released in 2018.

Why was SNX included in DPI?

One of the most established decentralized exchanges, SNX is a key player in the DeFi ecosystem. Synthetix also grants rewards to holders of SNX who stake their tokens. The platform facilitates trading autonomously, and is able to offer little to no slippage through leveraging the Synthetix debt pool and liquidity framework.

How can I buy SNX?

You can gain exposure to Synthetix and other leading blue chip DeFi assets by buying DPI which includes SNX tokens. You can buy DPI directly from the Index Coop by connecting your wallet to the Index Coop app.

If you’re looking to exchange a fiat currency, like the U.S. dollar, directly for DPI, then you’ll want an Ethereum wallet like Argent, Gemini, Metamask, or Rainbow. With each of these wallets, you can connect to your bank account or debit card, which allows you to exchange fiat currencies directly for Index Coop products like DPI.

What is DPI?

The DeFi Pulse Index ($DPI) is a digital asset index that tracks the performance of “blue chip” decentralized financial (DeFi) assets across Ethereum. It combines the features of an ERC-20 token and a traditional structured product to create a 21st-century digital upgrade to traditional structured products. DPI is capitalization-weighted based on the value of each token’s circulating supply and aims to track projects that have significant usage and show a commitment to ongoing maintenance and development.

As a bundled crypto asset, you effectively own all of the underlying tokens and can redeem your units of $TOKEN for the underlying tokens, a feature of traditional structured products that is typically reserved for large, institutional investors.

As an Ethereum-based crypto-asset, $DPI can be used productively throughout DeFi with opportunities for liquidity provision (LP), borrowing and lending, yield farming, and collateral debt position (CDP)

DPI was launched jointly by Set Protocol and Scalara (formerly known as DeFi Pulse Inc.), and was the first product to be managed by the Index Coop.

About Index Coop

Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.

How to buy Index Coop products with fiat currencies:

First, you’ll need to create an Ethereum wallet like Argent, Metamask, Gemini, or Rainbow.

Next, you’ll set up your new wallet and connect your bank account.

Once you’ve deposited fiat currency in your wallet you can exchange it for Index Coop products like DeFi Pulse Index (DPI) or the Metaverse Index.

You can also earn or buy DPI tokens directly via your favorite decentralized exchange.

>>Click here to buy DPI Tokens

Disclaimer: This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual in the area for which such advice would be appropriate. This information is not intended to be comprehensive or address all aspects of Index or its products. There is additional documentation on Index’s website about the functioning of Index Coop, and its ecosystem and community.

You shall not purchase or otherwise acquire any of our token products if you are: a citizen, resident (tax or otherwise), green card holder, incorporated in, owned or controlled by a person or entity in, located in, or have a registered office or principal place of business in the U.S. (a “U.S. Person”), or if you are a person in any jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized (together with U.S. Person, a “Restricted Person”). The term “Restricted Person” includes, but is not limited to, any natural person residing in, or any firm, company, partnership, trust, corporation, entity, government, state or agency of a state, or any other incorporated or unincorporated body or association, association or partnership (whether or not having separate legal personality) that is established and/or lawfully existing under the laws of, a jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized). You shall not resell or otherwise transfer any of our token products to any Restricted Person. The transfer or resale of any of our token products to any Restricted Person is not permitted. Click here to view the list of Tokens Restricted for Restricted Persons. You shall read the Terms of Service and use our Website in compliance with the Terms of Service.

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Information is for educational and illustrative purposes only. The Index Cooperative is not engaged in the business of the offer, sale or trading of securities and does not provide legal, tax, or investment advice. Cryptocurrencies and other digital assets are speculative and involve a substantial degree of risk, including the risk of complete loss. There can be no assurance that any cryptocurrency, token, coin, or other crypto asset will be viable, liquid, or solvent.No Index Cooperative communication is intended to imply that any digital assets are low-risk or risk-free. The Index Cooperative works hard to provide accurate information on this website, but cannot guarantee all content is correct, complete, or updated.

Synthetix: A Derivatives Liquidity Protocol in the DeFi Pulse Index

Leeron Hoory