Synthetix (SNX) Coin Complete Guide: Investment Strategies and Practical Tips for Beginners
Hello! Today, we're going to take a deep dive into Synthetix (SNX), a hot topic in the DeFi market. I'll explain in detail with real-world examples so that even those who are new to cryptocurrency investment can easily understand. After reading this article, you'll clearly understand what SNX is and how to invest in it!
Introducing Synthetix (SNX)
Synthetix (SNX) is an innovative decentralized derivatives trading platform based on the Ethereum blockchain. In simple terms, you can think of it as a system that allows you to make profits based on the price movements of an asset without having to directly own the actual asset.
Example: You can make profits based on the fluctuations in Tesla's stock price through a synthetic asset called 'sTSLA' on Synthetix without having to buy Tesla stocks directly. It's a similar concept to CFD trading, but it works in a more transparent and decentralized way with blockchain technology.
Currently, Synthetix allows you to trade over 200 different assets, including stocks, commodities, foreign exchange, and cryptocurrency indices, in the form of synthetic assets. In particular, it is a great advantage that you can access overseas stocks and raw materials that were difficult to access in the existing financial market 24 hours a day.
The history and development of Synthetix (SNX)
Synthetix was first launched in 2017 by Australian developer Kain Warwick under the name 'Havven'. Initially, it was a simple stablecoin project, but it changed its brand to 'Synthetix' in 2019 and evolved into the current synthetic asset platform.
Synthetix experienced explosive growth as the DeFi craze took hold in 2020. It has established itself as one of the core protocols in the DeFi ecosystem, with its TVL (total deposited assets) exceeding $1 billion. In 2021, the SNX token price hit its all-time high, providing early investors with thousands of times the profits.
Key Milestones:
• 2017: Project launched as Havven
• 2019: Rebranded as Synthetix, launched synthetic asset platform
• 2020: Rapid growth with DeFi craze, TVL exceeds $1 billion
• 2021: SNX token reaches all-time high
• 2023: V3 launch to build more efficient system
How Synthetix (SNX) works
The core of Synthetix is the 'Collateralized Debt Pool' system. It may sound a bit complicated, but I'll explain it step by step.
Step 1 - Staking SNX: When a user stakes SNX tokens as collateral (staking), they can mint sUSD (synth dollars) for a certain percentage of their value (usually 300-500%). For example, if you stake $1,000 worth of SNX, you can mint about $200-300 worth of sUSD.
Step 2 - Trading Synth Assets: You can use the issued sUSD to purchase various synthetic assets (Synths). You can choose from hundreds of assets, including sBTC (synth Bitcoin), sETH (synth Ethereum), and sTSLA (synth Tesla).
Step 3 - Realizing Profits: If the price of the selected synthetic asset goes up, you make a profit, and if it goes down, you lose money. You can always convert it back to sUSD and recover your principal.
Role of Chainlink Oracle: Synthetix uses Chainlink's price oracle to receive accurate price information in real time. This allows the price of synthetic assets to be accurately linked to the price of real assets.
Various ways to use Synthetix (SNX)
Synthetix can be used in a variety of ways beyond simple trading. I will introduce you to strategies that many investors are actually using.
Portfolio Diversification: In the past, investing in foreign stocks or raw materials required a complicated process, but with Synthetix, you can gain exposure to global assets with just a few clicks. Especially for Korean investors, there is an advantage in that they can trade even when the US stock market is closed.
Hedging Strategy: For example, if you hold a lot of Bitcoin and expect a short-term decline, you can hedge your risk by short-selling sBTC. You can manage your risk without actually selling Bitcoin.
Yield Farming: By staking SNX, you can receive weekly rewards and a portion of the trading fees. As of 2024, you can expect an annual yield of around 15-25%.
Actual Use Cases: There are about 20,000 active users worldwide using Synthetix, and the daily trading volume averages over $5 million. It is especially popular in Asia.
Synthetix (SNX) Exchange and Purchase Method
SNX tokens can be easily purchased on major domestic and international exchanges. Let's compare the features and pros and cons of each exchange.
Overseas exchanges:
• Binance: Highest trading volume and liquidity, low fees
• Coinbase: US regulatory compliance, beginner-friendly interface
• Huobi: Good accessibility in Asia
• Upbit: Direct domestic won trading possible
Decentralized exchanges (DEX):
• Uniswap: Highest liquidity
• 1inch: Automatically finds the best price
• Curve: Specialized in stablecoin trading
Precautions when purchasing: SNX may be affected by the high gas fees of the Ethereum network. We recommend checking the network conditions before trading and trading during times when gas fees are low. It is usually relatively cheap on weekends or during the early morning hours of Korean time.
Synthetix (SNX) Community and Ecosystem
Synthetix has an active community around the world. In particular, communication between developers and general users is active, and the project is evaluated as having high transparency.
Main community channels:
• Discord: Real-time chat and technical support
• Telegram: Korean channel operation, quick information sharing
• Twitter: Official announcements and updates
• GitHub: Open source code disclosure, developer participation
In particular, Synthetix also serves as a governance token, allowing SNX holders to directly vote on the future direction of the protocol. In fact, important decisions such as changing the fee structure and adding new synthetic assets are made through community voting.
Synthetix (SNX) Wallets and Security
Choosing the right wallet is important for safely storing and even staking SNX. Let's take a look at the features of each wallet.
Software Wallets:
• MetaMask: The most widely used Ethereum wallet, directly integrated with the Synthetix dApp
• Trust Wallet: Mobile-focused, supports a variety of tokens
• Argent: Smart contract wallet, highly secure
Hardware Wallets:
• Ledger Nano: Top-tier security, offline storage
• Trezor: Open-source, user-friendly
Security Tips: To stake SNX, you must connect your wallet to the dApp, so make sure to access it only through the official site (synthetix.io). There are many phishing sites, so please carefully check the URL, and if possible, we strongly recommend using a hardware wallet.
Synthetix (SNX) Investment Strategy and Risk Management
If you are considering investing in SNX, carefully check the following points.
Things to consider when investing:
• High volatility: SNX is one of the most volatile DeFi tokens
• Collateralization ratio management: If the collateralization ratio falls below the target level when staking, there is a risk of liquidation
• Ethereum network dependency: It may be affected by increased gas fees or network congestion
• Regulatory risk: It may react sensitively to changes in DeFi regulations in each country
Risk management strategy:
1. Invest only within 5-10% of your portfolio
2. Maintain a generous collateralization ratio when staking (400% or more recommended)
3. Check and adjust the collateral ratio regularly
4. Keep an eye on the overall trends of the DeFi market
5. Never invest with borrowed money
Long-term investment perspective: Synthetix is playing an important role as infrastructure connecting traditional finance and DeFi. As more assets are tokenized and the accessibility of the global financial market increases, the value of Synthetix is also expected to increase.
Conclusion
We have learned about Synthetix (SNX) in detail so far. It may seem complicated, but the key is that it is an innovative system that allows you to track the price movements of assets without owning the actual assets.
As the DeFi market continues to grow, the importance of protocols like Synthetix will likely increase. However, please always make investments carefully and within your means. Cryptocurrency investment carries high returns but also carries risks.
We will continue to share useful information related to DeFi and cryptocurrencies in the future. If you have any questions, please leave a comment at any time!
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