Synthetix is a decentralized platform built on Ethereum and Optimism, where users can stake SNX (the native token) and mint sUSD with a collateral ratio of 500%. The platform offers exposure to various assets, including cryptocurrencies, real-world currencies, and stocks. Additionally, Synthetix addresses liquidity and slippage issues differently from traditional order book systems. Instead, they employ an oracle to obtain prices for assets like BTC and ETH, allowing users to exchange any number of assets (up to the collateral ratio) using sUSD.
However, the process is not as straightforward as it may seem. When users mint sUSD, they incur network debt exposure. This means that as the value of Synths (synthetic assets) rises, the debt pool also grows. For example, consider Alice, who holds sUSD worth $50k, and Bob, who purchased sBTC for $50k when BTC was priced at $25k. Both Alice and Bob are responsible for 50% of the debt exposure. When the price of BTC increases to $50k, the total debt pool grows from $100k to $150k. Now, both Bob and Alice need to supply $75k to unstake their SNX tokens. In this scenario, Bob benefits because his 2 BTC are now worth $100k, and he only needs to pay $75k to unstake. However, Alice faces a challenge as her debt has also increased to $75k despite not taking any further actions. Understanding this aspect of the Synthetix ecosystem is crucial for users. The platform provides manual methods to hedge debt, such as purchasing dSNX (available only on Optimism).
Overall, this project deserves attention given its longevity, but it is essential to be aware that much of the ecosystem's stability depends on the price of SNX. A sharp decline in SNX's price could trigger a wave of liquidations. Show Less
1
