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Synthetix community halts token inflation, embraces buybacks, and burns

TL;DR

  • Synthetix ends token inflation and prioritizes buybacks.
  • SNX token surges 8% on market approval.
  • Aligns with industry trends for deflationary models.

Synthetix, the decentralized derivatives protocol, has seen its community members overwhelmingly approve the governance proposal SIP-2043. This pivotal decision marks the end of token inflation for Synthetix’s native token, SNX, and paves the way for a new era of strategies, centered around token buybacks and burns. These changes are set to be implemented in the forthcoming Andromeda software release.

The end of token inflation

In a significant move, Synthetix has opted to terminate its token inflation model in favor of a more sustainable approach. The approval of SIP-2043 by the project’s community members ushers in a fundamental shift in the protocol’s economic framework.

Token inflation, which was initially introduced as an incentive mechanism to encourage liquidity and growth, has been deemed less effective by the Synthetix core team. As a result, the decision has been made to discontinue the practice.

Focus on token buybacks and burns

With the cessation of token inflation, Synthetix is poised to embrace a new set of strategies. The primary focus will be on token buybacks and burns, aimed at reducing the token supply and increasing its scarcity. This move aligns with the broader crypto industry trend of embracing deflationary models to enhance token value.

One immediate consequence of this change is that Synthetix stakers will no longer be required to claim weekly inflationary token rewards. Instead, the project plans to allocate trading fees towards buybacks and burns, effectively utilizing protocol-generated income to acquire and subsequently burn SNX tokens.

Market response and performance

The market has responded positively to Synthetix’s decision to end token inflation and pivot towards buybacks and burns. The SNX token, in particular, has experienced a significant rally, reaching its yearly high. At the time of writing, it is trading at $4.75, marking an impressive 8% increase for the day. With a total supply of approximately 328 million SNX tokens and a fully diluted market capitalization of $1.5 billion, Synthetix continues to assert itself as a prominent player in the crypto space.

Synthetix’s role in decentralized derivatives trading

Synthetix is renowned for its role in facilitating decentralized derivatives trading. The protocol operates through liquidity pools, which currently hold a total value locked (TVL) exceeding $890 million. These liquidity pools span both the Ethereum network and the Optimism Layer 2 network, underlining Synthetix’s commitment to providing efficient and secure trading solutions for its users.

As Synthetix embarks on this new chapter, the community eagerly anticipates the implementation of these changes in the forthcoming Andromeda software release. The shift towards token buybacks and burns reflects the project’s determination to ensure the long-term sustainability and value appreciation of SNX tokens.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Benson Mawira

Benson is a blockchain reporter who has delved into industry news, on-chain analysis, non-fungible tokens (NFTs), Artificial Intelligence (AI), etc.His area of expertise is the cryptocurrency markets, fundamental and technical analysis.With his insightful coverage of everything in Financial Technologies, Benson has garnered a global readership.

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