Synthetix (Ethereum) DAPP (Part 03)
This is the third post continuation to the series of discussion on a nice decentralized application called Synthetix based on ETHEREUM blockchain. Today I am going to share about the importance of sake and incentive in this DApp. Stakers play a crucial role in the Synthetix ecosystem by providing the collateral necessary to create Synths. In return for staking their SNX tokens, stakers earn rewards in the form of SNX tokens and a portion of the fees generated by the platform. The system is common in the decentralized world. These fees are collected from users who trade Synths on Synthetix. Exchange and are distributed to stakers as an incentive for maintaining the system's stability. This way the stakers get interested in being part of the system.
Staking also comes with risks. Since the value of Synths is directly tied to the value of the underlying assets, stakers are exposed to price fluctuations. If the value of the staked SNX tokens falls significantly, stakers may need to add more collateral to maintain the required collateralization ratio. Again, if the value of the Synths they have minted increases, they may face the risk of being liquidated if they cannot maintain sufficient collateral. this is a high risk factor. To resolve these risks, Synthetix came up with some techniques like Debt Hedging features. The hedging option protects users from big losses in the volatile market situation. This feature is useful for stakers to protect themselves against adverse price movements. So the overall technique and mechanism is staker friendly. That's why the mechanism got success in the early stages of its journey. In the next post I will share how it explored the DeFi world and some of the challenges of it. Thanks.
Expanding the DeFi Ecosystem :
Synthetix has become a vital component of the broader DeFi ecosystem, offering a range of integrations and partnerships that expand the platform's functionality and reach. One notable integration is with Curve Finance, a decentralized exchange focused on stablecoin trading. By partnering with Curve, Synthetix has enabled users to trade between different Synths with low slippage and minimal fees, enhancing the overall trading experience.
In addition to Curve, Synthetix has also integrated with a variety of other DeFi protocols, including Aave, Balancer, and Yearn Finance. These integrations allow users to leverage their synthetic assets in a variety of ways, such as earning yield, providing liquidity, or participating in decentralized lending and borrowing.
Synthetix's role in the DeFi ecosystem has also been bolstered by the rise of yield farming and liquidity mining, where users can earn additional rewards by providing liquidity to decentralized protocols. By offering attractive incentives for staking and liquidity provision, Synthetix has attracted a large and active community of users who contribute to the platform's growth and success.
~ Regards,
VEIGO (Community Mod)
Upvoted! Thank you for supporting witness @jswit.
Glad to see this application on the Ethereum network but I have never checked it out so its a new one for me but will be trying to go through it if possible to understand how it works and what are the fundamentals it is built on.