DeFi

What is Synthetix (SNX)? Everything You Need to Know

Published

2 years ago

August 13, 2021

admin

Synthetix is a DeFi protocol for synthetic crypto assets. Born from the ashes of the 2018 bear market, along with Maker, Compound, Uniswap, and a few others, Synthetix paved the way for decentralized finance to become an important industry in the cryptocurrency world.

After starting a stablecoin project called Havven, Synthetix went through a major shift during the crypto bear market to become a protocol for synthetic assets. The community behind Synthetix pioneered many of the mechanisms that are considered standard in today’s DeFi world.

Synthetix, which remains one of the cornerstones of DeFi on Ethereum and will soon launch a layer 2 scaling solution, is likely to continue to be an important part of DeFi for the foreseeable future.

What is Synthetix?

Synthetix is a synthetic asset protocol that allows issuing synthetic assets on Ethereum. You can think of a synthetic asset as a type of derivative. It allows opening a position with that asset without having to own it.

So, what could be a synthetic entity or “Synth”? It is possible to convert almost anything with a reliable price flow into a synthetic asset. Examples include cryptocurrencies such as BTC and ETH, commodities such as gold and silver, and fiat currencies such as USD. There are even reverse synths that track the underlying asset in reverse, giving users an easy way to enter short positions or hedge their existing savings and yield farming positions.

The main idea is that users can open positions with certain assets that are not on the chain using Synthetix. Synthetix also allows the creation of indices, such as the DeFi index, which tracks the price of a portfolio of different DeFi assets.

How does Synthetix work?

Synths use decentralized price oracles to track the prices of underlying assets. It is worth noting that synths are different from cryptocurrencies such as stablecoins backed by a reserve. What gives Synth its value are a variety of complex on-chain mechanisms and smart contracts, rather than a reserve in the traditional sense.

For example, BUSD is a stablecoin where each BUSD represents 1 USD in reserve. Similarly, Paxos’ Pax Gold (PAXG) is backed by physical gold bars. In a way, if you have PAXG, you also own an equivalent amount of gold in the underlying gold reserve. In other words, PAXG is a token that represents ownership of gold.

But Synths are different. They track the price of assets through a complex smart contract mechanism. Owning an sXAU does not mean you have a foothold. It simply means that you have opened a position on the gold price.

Then why would you want to hold such a being? As we mentioned earlier, synthetic assets are a good way to enter a position on the price of an asset without having to own it. Another thing that makes synths useful is that since they are ERC-20 tokens on Ethereum, other DeFi protocols can easily integrate them as well. Synths can be deposited in places like Uniswap, Sushi or Curve. Also, like other ERC-20 tokens, you can provide liquidity and profit from transaction fees.

Synthetix Network Token (SNX)

So, if these tokens are not backed by an underlying asset, what are they collateralized with? Essentially, this collateral is done with the platform’s token, SNX. In addition, Synthetix has recently added ETH to the supported collateral.

Synthetix works with overcollateralization – meaning each synthetic asset is collateralized with a higher value than it represents.
Synths are created by users who stake collateral (SNX) and in turn issue a synthetic asset. In other words, essentially each Synth is a loan against collateral deposited.

All debt positions must maintain a certain collateralization rate. This rate is determined by governance. It aims to ensure that synths are adequately collateralized and that there are no vulnerabilities in the system, even in rare events such as major market crashes.

Stackers must manually manage this rate by issuing and burning Synth (debt) or adding more collateral to continue earning staking rewards.

Zero slippage and infinite liquidity

Due to the lack of an order book and slippage in the traditional sense, Synthetix advertises itself as an exchange with “infinite liquidity”. Pricing is done through an algorithmic mechanism that is more similar to the way an automatic market maker (AMM) works rather than a central limit order book (CLOB).

As a matter of fact, when you trade with Synthetix, you are not trading against a person or a market maker. Instead, you repay some of your debt to the debt pool and borrow the same amount as another Synth.

This is a complex mechanism with many nuances, but the important thing to understand is that trading with Synthetix is not the same as trading with Binance’s order book or Uniswap’s liquidity pools.

Synthetix and Optimism

So why isn’t the entire NASDAQ listed on Synthetix yet? Transaction fees and guarantees on the Ethereum mainnet are not very convenient for most people and trading styles. That’s why Synthetix contracts will be made available on a layer 2 solution called optimistic rollup, an implementation of Optimism.

Rollups are a great way to scale blockchains. Unlike other scaling solutions, such as sidechains, which self-secure using a different set of validators, rollups derive their security from the Ethereum blockchain. This is the most fundamental difference. Rollups can achieve the same scaling benefits as sidechains (for example, higher throughput and lower transaction fees) without compromising much on security.

But Synthetix contracts are one of the most complex among smart contracts. Moving these contracts to such a high-tech product in the safest way is not an easy task. Optimism has been working in the background with Synthetix for some time and its mainnet rollout is expected in summer 2021.

Last words

Synthetix is a synthetic asset protocol on Ethereum. Synths track the price of the underlying asset without users having to own the asset itself. Synthetix is one of the oldest DeFi projects with decentralized governance structure through SynthetixDAO. While Synthetix isn’t a very easy to understand project, it could gain further adoption after Optimism’s rollup implementation.

DeFi

What Exactly Is Arbitrum?

Published

10 months ago

October 25, 2022

Efekan Ozdan

Ethereum is a well-known platform for creating decentralized applications (DApps). However, due to a rapid increase of its users in recent years, the network has been pushed to its ultimate limits, causing transaction costs to skyrocket and widespread congestion.
Some believe that on-chain changes and improvements are the best approach to expand Ethereum, however, others are opting for second layer alternatives.

Although they differ widely in terms of appearance and purpose, one such option, known as Arbitrum, has begun to gain attention.

What Is Arbitrum?

It is one of the layer 2 solutions that enhances the capabilities of Ethereum smart contracts by increasing their speed and scalability while also providing extra privacy features.
The platform is meant to make it simple for developers to run unmodified Ethereum Virtual Machine (EVM) contracts and Ethereum transactions on a second layer and at the same time taking use of Ethereum’s superior layer 1 security.

It’s designed to address some of the current Ethereum-based smart contract’s problems, such as inefficiency and high execution costs, which have harmed the Ethereum experience for users and frequently make transactions costly.

DeFi

NFT Gas Prices: What Are They? Getting To Know Ethereum, Gas, And Gwei

Published

10 months ago

October 24, 2022

Efekan Ozdan

What exactly is ETH Gas?

The Ethereum network uses the Gwei as a unit of gas. Miners need gas to process transactions, which is one of the main differences that seperates Ethereum from other cryptocurrencies such as Bitcoin.

“How much gas you’ll need depends on the size of the contract you’re aiming to complete and how quickly you want to complete it.” The price usually reduces if you’re patient enough to wait for a transaction to finish. Both NFT art makers and collectors benefit from understanding this idea.

If we want to have a look at the technical side, Ethereum’s native currency, ether (ETH), is used to pay gas fees. Gas costs are expressed in Gwei, which is an ETH denomination — one Gwei equals 0.000000001 ETH (10-9 ETH). Instead of claiming that your gas costs 0.000000001 Ether, you may say that it costs 1 Gwei.

Why is there Gas?

The gas in Ethereum is a crucial regulator that prohibits spamming the network. All Ethereum computations push the security measure to its limit. Gas limits, which are paid for with each computational execution, have the mission to ensure that bad individuals do not exploit unsorted amounts of processing power to become de-facto coders on the Ethereum network and corrupt the future they worked hard for creating.

Why Gas is so important for NFT arts and artists?

Gas has two sides to it. When gas costs are rising, it is difficult for uprising artists to generate, mint, and even purchase other works. Some artists try to include the cost of gas into their paintings (which indicates that they are ready to lower the cost of their art, to make their art easier to buy.) This creates a catch-22 because the art’s perceived “worth” is reduced when collectors are deciding whether or not to spend 25-57 percent of the overall purchase price on gas. Artists aiming to build a reputation for themselves face a difficult situation in this regard. On the other hand, artists might overcharge while selling their work (paying higher marketplace and gas costs) in order to get their work published before they have built a reputation for themselves to be able to charge that much.

Overwhelming and Absurd NFT Gas Cases

We’ve seen gas costs exceed the cost of a piece of art being created in some cases, leaving artist in a very difficult situation to put their work online. Actually, making it impossible for the artist.

Solutions for NFT Gas

Allow the NFT Artists to have more power when their work is minted. Many marketplaces only let artists to create something at the very moment they click mint. Artists should be able to choose how long they want to wait for network congestion to clear before publishing. This is already implemented in NFTGateway (As far as I know). The painting isn’t minted until it has been bought during a drop. The art might not appear in wallets instantly, the transaction might take 24 hours. While we haven’t experienced such a long wait, we have seen up to two-hour waits for costly drops expectations.

The User receives back any unused gas

Finally, it’s essential to emphasize that not all transactions use the total gas supply. This should be better stated, and we’ll need to undertake further studies to find out what proportion of gas is returned on average. However, you’re essentially accepting to a maximum amount of gas fees that you’ll pay to complete the deal.

DeFi

What is Play-To-Earn (Play2Earn) All About? Begginer’s Guide

Published

1 year ago

March 3, 2022

Efekan Ozdan

The play-to-earn business model promotes the idea of an open economy by rewarding players who contribute to the metaverse’s value.

Play-To-Earn (Play2Earn) games are a type of gaming in which a platform allows players to earn any type of in-game property that can be transferred to the real world assets that has value like money.

Play-to-Earn Crypto Gaming: Begginer’s Guide

Video game business models have evolved to a whole new level as technology has become more widely accessible to the public. Before, people were able to play games only in certain gaming areas on arcade machines. With a bag full of quarters, gamers would compete for the highest score. But, as technology advanced, games were introduced to our smartphones, PCs, and gaming consoles such as the PS5, Xbox, and others.

What Is Play-to-Earn Gaming?

In the blockchain ecosystem, a new game paradigm known as play2earn is currently being seen around the world. It effectively allows participants to profit from their participation in games. By participating in the in-game ecosystem and earning assets for their contributions, players create value for other gamers and developers. Coins and accessories that have been tokenized on the blockchain are examples of digital assets. As a result, blockchain games and the play-to-earn business model support each other effectively.

Play to Earn Games

Axie Infinity is an excellent example of a play2earn game. Axies are charming animals that players buy, breed, and combat for rewards in this game. Each Axie is a non-fungible token (NFT), which means it’s a unique digital collectible. There is an entire economy within the game (There is a world known as Lunacia).

Users can use their in-game tokens, Smooth Love Potion (SLP), and Axie Infinity Shards (AXS) to buy land and breed Axies in Lunacia. In addition, these tokens are not just useful in the game, they are also useful in real life.

Play-to-earn games, such as Axie Infinity (AXS), are already assisting people all over the world (particularly those who live in countries affected by the current pandemic severely) earning a significant amount of money. People in the Philippines are making $1,500 to $2,000 per month playing Axie Infinity as a hobby, according to estimates. A good number of people in Vietnam have also given up their full-time jobs as a result of these games, which pay well.

Lost Relics, Splinterlands, CryptoBlades, DogemonGo, and Sorare are some of the other NFT games.

In 2021, the NFT market will have topped $2.5 billion in revenues, and this figure is expected to rise rapidly as new NFT games hit the market. The rise of NFT is leading to a new era of revenue streams in the blockchain world, and it won’t be long before it overtakes every other major business.