A common FOMO mistake is to pick a token that’s pumping and hope it continues to pump. That would be a financial disaster! Getting familiar with a coin like Synthetix (SNX) before making an investment should be your best move as a serious investor. So, the question of how to stake SNX should come after the nitty gritty of familiarity has been done.
Staking SNX is done to offer collateral that traders on the Synthetix Exchange can employ. After every deal, transaction fees are gathered and added to the collateral pool. A user must know all the dangers involved before staking any SNX tokens.
Through staking and subsequent Synth minting, the Synthetix Network Token, an ERC20 utility token, runs the Synthetix ecosystem. But how the process works and for how much are primary questions that need answers when you’re looking for a good income source, with less effort.
Today’s Synthetix price is $3.83 with a 24-hour trading volume of $82,304,855. Synthetix is down 6.36% in the last 24 hours. The current CoinMarketCap ranking is #92, with a live market cap of $440,397,619. It has a circulating supply of 114,841,533 SNX coins and a max. supply of 212,424,133 SNX coins.
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What is SNX?
The Synthetix Network is distinctive in a few ways. The ability for anybody to convert Synths without the necessity for a counterparty is perhaps most notable.
The Synthetix Exchange offers almost unlimited liquidity and allows for trading any synth for any other synth.
Peer-to-contract (P2C) trading, another innovation provided by the Synthetix network, allows transactions to be conducted fast and simply without using an order book. This collateral is provided on the platform, and a distributed pool of token holders maintains the stability of the entire exchange.
Synths can take any shape and are identified by an “s” prefix; fiat synths resemble sEUR, sUSD, and so on.
The process of staking turns the SNX token into network pooled collateral. When an investor stakes their tokens, they create sUSD that can be used by them or other investors to trade for virtual assets. On Synthetix Exchange, the staker may exchange the sUSD for a virtual asset, and on other exchanges, they can do the same for ETH or another ERC20 token.
For collateralizing the network, speculators receive weekly payouts. An SNX investor can only make money from a rise in token price without staking. Approximately 80% of SNX coins are staked as of February 2020. Current network statistics are available in Synthetix Dashboard, including staked tokens’ proportions.
What is Synthetix Exchange?
A synthetic asset issuance protocol built on Ethereum is called Synthetix. Synthetic assets are financial products in the form of ERC-20 smart contracts known as “Synths,” which track and give the returns of another asset without having you retain that asset. They are comparable to derivatives in traditional finance. On Kwenta, Synthetix’s decentralized exchange, you may trade Synths, which include cryptocurrencies, indices, inverses, and physical assets like gold (DEX). The Synthetix Network Token (SNX), the company’s native token, is utilized as collateral for issued Synths.
Synthetix, one of a growing number of decentralized finance (DeFi) cryptocurrencies, provides this function entirely through code, obviating the need for a middleman. Synthetix is just a set of smart contracts active on the Ethereum blockchain.
This implies that users of Synthetix do not have to put their confidence in a specific organization or individual to handle the crypto assets they generate. They merely need to believe that the code will run exactly as intended.
Synthetix can create these new assets through a procedure known as collateralization.
Users must acquire Synthetix’s cryptocurrency, SNX, to collateralize an asset on the platform. Once locked in a unique contract, SNX may be utilized to create these new assets (called synths).
How does SNX staking work?
Staking often entails locking up digital assets to take part in a proof-of-stake (PoS) consensus method. A connected blockchain is managed and protected by a PoS technique. Staked cryptocurrency tokens are frozen for a set time to maintain network stability. Users who stake bitcoin tokens receive benefits for sustaining and protecting the network.
Staking is still referred to as staking, although it differs differently on the Synthetix platform. Staking entails putting the native SNX token in a collateral pool and locking it since Synthetix is an asset issuance and trading platform. The collateral pool provides the Synthetix Exchange’s liquidity. A fake USD token (sUSD) is created when a user bets SNX. The sUSD tokens represent the user’s debt in the collateral pool.
The Synthetix Exchange may boast “unlimited liquidity” because of the collateral pool that makes trading possible. Trading is done against the collateral pool rather than the conventional order book. The pool’s value drops when traders make money as gains are divided. The pool gains value when traders incur losses because it collects their losses. Those who stake in SNX are compensated for providing liquidity on the Synthetix Exchange and for accepting related risks.
Any SNX token owner is eligible to stake their money on the Synthetix network. However, gas (transaction) fees could be more than staking payouts if a user holds fewer than 500 SNX tokens.
How to Stake SNX
Through the staking component of the Synthetix web platform, SNX token staking may be done directly. Users may manage to stake, obtain rewards, and mint Synths for the network via the platform. A user will need a Web 3.0 digital wallet, such as MetaMask, to connect with Synthetix. The Synthetix platform and a user’s digital assets are connected through a Web 3.0 digital wallet.
Step 1: Open the SNX site
Go to the official Synthetix staking platform by visiting the Synthetix website, then select “Connect Wallet” in the upper right corner of the page.
Step 2: Connect Wallet
Connect your Web 3.0 digital wallet to the Synthetix platform by choosing it from the pop-up menu.
Step 3: Stake SNX and mint sUSD
Click “Staking” in the left tab when your wallet has been connected, then “Mint & Burn.” Depending on your SNX holdings, you may either opt to mint the maximum amount of sUSD or a bespoke quantity. Enter the desired stake in SNX in the following box, then click “Mint sUSD.”
Step 4: Finalize
The transaction must be approved in your Web 3.0 digital wallet. Your SNX tokens will have been staked, and sUSD tokens will have been created after the transaction is verified. Now, you’ll start to accumulate sUSD and SNX coins. These are accessible through the Synthetix platform.
Step 5: Claim Rewards
Click the “Home” option on the Synthetix platform to get your rewards. Click the “Claim SNX” button on the homepage to claim SNX staking rewards. You can view the next reward period’s end date and whether a claim is active or closed on the following page. Your awards must be claimed within 7 days after release to avoid forfeiture and rolling back into the collateral pool. Users must maintain their collateralization ratio within 1% of 600% to get prizes. This means that it cannot be less than 594%. You may keep an eye on the wallet’s collateralization ratio on the staking site.
How much can you earn by SNX staking?
Users that stake SNX earn benefits from two sources: weekly inflation and trading fees from the Synethetix Exchange. These techniques encourage the Synthetix network’s desirable behavior and compensate users for their staking. The bulk of SNX is therefore being staked, with about 80% of the amount at any given moment.
Synthetix trading for instruments. The exchange charges a 0.3% fee and is collected and dispersed based on the pro rata balance of SNX stakeholder accounts.
Synthetix launched an inflationary money supply for increased staking incentives in March 2019.
This inflationary structure will end at a supply of about 250 million SNX in September 2023, and the protocol will then transition to a flat 2.5% annual issue rate.
Benefits of SNX staking
- Market capital: Any gains would be based on the market price of SNX if SNX tokens were not staked. The Synthetix platform holds a sizable portion of all SNX tokens.
- Infinite liquidity: Traders don’t have to worry about “slippage,” or driving prices down when they place large sell orders, reducing their overall profits.
- Censorship resistance: Since the system is decentralized and governed by smart contracts, it is free and open to everyone (and resistant to censorship). In fact, users don’t even have to create an account to start using Kwenta.
- Set exchange rates: Oracles from another DeFi protocol called Chainlink (LINK) provide the price feeds that set exchange rates for each synthetic asset. This differs from traditional exchanges, where prices are determined by the point at which buyers and sellers are willing to meet.
- Lower fees: Trades come with fees of between 0.3% and 1%, and the proceeds get sent to a pool where SNX stakers claim them as rewards for staking tokens.
- Global: The Synthetix Exchange may one day allow traders to transact in synthetic assets anywhere around the globe.
Risks involving SNX staking
The profits that stakers receive are by no means risk-free. The staker offers merchants collateral to trade against.
- Alteration of fees: Stakers will ultimately lose financially if traders are lucrative after fees. The stakeholder’s position is initially somewhat less risky due to protocol incentives, but this calculation is subject to alteration at any time.
- Change in required collateral: The amount of collateral, however, is subject to change. When traders make money, the collateral pool might go down, and when they lose money, it can go up. If traders consistently make money, staked SNX tokens may decline.
- Lower gains versus fees: Due to the significant transaction costs, the approach is only possible for individuals staking over 500 SNX tokens on Synthetix. Gas costs and amounts less than 500 tokens may exceed the advantages of staking.
- Claiming period is crucial: Rewards for staking need to be claimed within a week. Any interest collected is added to the collateral pool if awards are not claimed within that time. If people don’t use their incentives within the allotted period, they risk losing money.
Should you stake SNX?
Staking SNX is a fantastic technique to make use of your resources. The act of learning how to bet and collect rewards is beneficial in and of itself, even if we generally acknowledge that 800% collateralization makes it impossible to generate significant fees.
One thing you have been made aware of with this guide: Synthetix offers a robust selection of ways for customers to use their products to generate passive money. Check out the lesson on sETH & sUSD liquidity incentives to discover other ways to profit from Synthetix.
If you want to set your portfolio up for the biggest chance of success, you need to invest in solid projects. While people have made money from meme coins and sentiment-driven price pumps in the past, this isn’t sustainable. And it’s also much harder to do right now as we’re in a bear run.
The combined effect of high volatility and low slippage inflicts a significant loss on the people who are using the exchange. The reason behind this is that the user cannot sell the asset when he wants and at the price that he wants. He needs to wait for confirmation.
These processes might take a bit more research, but they’re the best way to viably set yourself up for gains further down the line.