The growing DeFi market is creating new ways for individuals across the globe to invest in a broad range of assets. Synthetix, for example, tokenizes stocks, indices, commodities to bridge the gap between the traditional financial markets and digital assets.
In this guide, you will learn about Synthetix and how you can use this platform to earn investment income.
What Is Synthetix?
Synthetix is a liquidity protocol that focuses on tokenized assets – stocks, currencies, and commodities – to allow anyone with an internet connection.
across the globe derivatives, allowing users to trade derivatives within the DeFi space.
From the outset, digital assets have given users the purchasing power needed to grab everything from pizza to homes. With Synthetix, you can trade stocks, currencies, commodities, and any other derivative-structured asset for which Synthetix decides to mint a token.
How Does Synthetix Work?
The Synthetix system is relatively straightforward. It consists of two types of tokens: Synthetix (SNX) and Synths.
- To trade an asset, you first have to purchase SNX and lock it in your wallet.
- Then, you select the asset you’d like and purchase a synth that tracks its price.
For instance, if you want to buy some USD, you can select the sUSD token. You can use the same process for any other asset that has had a synth minted for it. This opens the door for a more simplified trading process, particularly for investors who want to deal in a variety of assets.
For example, a trader may have one account for trading stocks and indices, but another for trading forex and commodities. Signing in to multiple accounts while using multiple screens and trying to keep track of all positions can quickly become a laborious endeavor. With Synthetix, all trading can be done under one roof.
Cross-Asset Trading
Synthetix also opens the possibility for essentially trading one asset for another in ways that were previously difficult or complicated.
For instance, in a traditional system, you may have a $20,000 EUR/USD position in a trading account and want to use it to purchase bitcoin. You would have to first sell your EUR in your forex account and initiate the withdrawal process. Depending on how you funded your account and your broker, it may take days for the funds to hit your bank account. Once they arrived, you’d have to make a deposit in whichever account you use to purchase BTC and then begin that purchase process. But with Synthetix, you can go from EUR to BTC in a few clicks.
Synthetix has minted tokens for dozens of derivatives, including the leading digital assets, as well as an index for DeFi (sDEFI). They also mint tokens that move inversely to the price of some assets. These are marked with an “i” preceding the asset’s letters. For example, the asset moving opposite bitcoin is “iBTC” and for Cardano, it’s “iADA.”
As Synthetix mints more synths that track the prices of more derivatives, the platform has the potential to become a one-stop-shop for virtually all of the trading activity for investors with even very diverse portfolios.
How to Use Synthetix to Earn Investment Income
You can earn investment income by staking on Synthetix.
You stake by purchasing and holding the Synthetix network token, SNX. This powers the Synthetix ecosystem. Regardless of the asset being traded, each transaction comes with a fee of 0.30%. When you hold SNX, you are awarded a portion of this fee, according to the amount you have staked. You can, therefore, reap rewards regardless of how the price of SNX fluctuates.
The staking process on Synthetix is fairly straightforward:
- Go to the Synthetix website and select Staking.
- Choose the wallet you want to use.
- Connect your wallet, such as Metamask, as shown below.
- Allow access to your wallet.
- Select Mint to stake
- Enter the amount you want to stake. Keep in mind the fees outlined under the Mint Now button.
- And voila! You are now earning staking rewards on Synthetix.
Synthetix represents an important step in the DeFi space. Although the list of derivatives is currently limited, the Synthetix platform provides the infrastructure to create a tokenized asset trading system that anyone with an internet connection can access.
Further reading:
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