How Synthetix works

Synthetic asset created on the Synthetix platform are known as "synths". It is minted against the value of the native SNX token which acts as the primary form of collateral backing synthetic assets available on Synthetix. All Synths are currently backed by a 400% collateralizatoin ratio, though this can change through future governance proposals. SNX stakers incur debt when they mint Synths and burn Synths to exit the system. SNX holders are incentivized to stake their SNX token to earn their proportional fees each week, as well as inflationary rewards. Stakers are unable to claim fees if the value of their collateralization ratio falls below 400%, which ensures Synths are backed by sufficient collateral to absorb large price movements. Synths can bve traded on Kwenta, Synthetix's decentralized exchange (DEX) with zero slippage.

How Synthetix makes money

Synthetix charges an exchange fee whenever a user exchanges one synth for another through Kwenta. The fees typically average around 30bps but can range anywhere between 10-100bps. The generated fees are automatically sent to the fee pool which can be claimed proportionally by SNX stakers each week as long as they maintain at least a 400% collateralization ratio.

How you make money on Synthetix

You can deposit SNX as collateral to get exposure to synthetic assets and realize profits through longing and shorting the underlying asset on the Kwenta exchange. SNX holders can also stake their tokens and earn protocol fees and inflationary SNX emission over time.