Synthetix is a platform that allows you to mint synthetic assets that are pegged to the value of real assets. This means you can mint Synthetic Dollars, Synthetic Precious Metals, Synthetic Stocks, Synthetic commodities such as Oil and of course Synthetic Cryptocurrencies.
Requirements:
- Web3 Capable Wallet - Coinbase, Argent, Metamask
- sUSD tokens or SNX tokens
- ETH for gas fees - use TxStreet for gas prices, you will need enough for 2-5 transactions
Two Paths - A Choice
If you're just beginning your journey then you're going to need to either purchase sUSD from an exchange or purchase SNX Tokens and stake them. If you're planning on buying and staking SNX skip down to that section below.
Path One - Buying sUSD
There are a variety of ways to purchase sUSD, I recommend using Coinbase, Argent, or Gemini. Simply create an account if you don't already have one and hook up your bank account to load cash into the exchange. Then you can place orders for sUSD and for ETH to pay the transaction fees; Once you've completed this step you can skip to the "Exchanging sUSD" portion of the guide.
Path Two - Buying & Staking SNX
Similarly to buying sUSD, buying SNX can be done using Coinbase, Argent, or Gemini. Before you stake be sure to read the disclaimer below. Create an account if you don't have one already and load some cash into the exchange. Then you can place orders for SNX for staking and ETH to pay the transaction fees.
Once you've received your SNX it's time to stake it using the Synthetix Staking Site. Simply connect your wallet using Wallet Connect or one of their other options and click stake. A window will pop up asking you how much you'd like to stake, input the amount you'd like and confirm the transaction fee. Congratulations you've now bought and staked your SNX!
Disclaimer: Smaller positions may have to pay more in fees than they earn from staking. It may or may not be worth it depending on how much you value taking interest free loans from yourself. If you don't find it worth it consider staking on L2 which fixes that problem but doesn't have as many applications hooked up yet.
Minting sUSD
Once you've staked your SNX tokens you can mint sUSD based on the current collateralization level on the SNX Staking Site.
Warning:
It's important not to mint at the maximum ratio allowed because negative price action could put you at risk of losing part or all of your position. I recommend keeping the collateralization ratio at 50-100% above the required level to keep your positions safe during volatility, and also to only use derivatives when you are certain you have a good entry point.
Sound complicated? Well lets simplify things with an example. Lets assume I've bought $4,000 worth of SNX tokens and the Current Collateralization Ratio is 400%. How much can I mint total? and how much should I mint to keep risk low?
Since the collateralization ratio is 400% I need collateral worth four times the value of my loan. That means I could take a loan of $1,000 in sUSD using my $4,000 in SNX tokens and still meet the 400% collateral requirement. But how much should I take? The answer is $800. That amount would let us exceed the collateral requirement by 100%, which would give us safety even in a significant downturn.
Once you've decided on the amount of sUSD to mint, simply mint it on the staking site and confirm the transaction. Congratulations now you should have a loan of sUSD in your wallet!
Exchanging sUSD
Once you've acquired your sUSD you can use it in a multitude of ways:
- Use Kwenta to trade between Synthetic assets such as Stocks, Cryptocurrencies, Oil, Precious metals, Fiat currency, and stock indexes.
- Use dHedge to join a hedge fund or start your own to trade any variety of synths
- Use Yearn Finance or AAVE to earn a yield on your sUSD
- Provide sUSD liquidity to UniSwap, SushiSwap, or Curve Finance to earn a yield
- If you're staking SNX you can simply hold sUSD and collect your yield weekly by paying the transaction fee and transferring earned sUSD and SNX into your wallet.
If you've made it this far then congratulations, you've successfully dipped your toes into the world of synthetic assets. I couldn't possibly fit everything into this guide but I hope it you felt a small portion power these tools have in creating and providing fair access to wealth for everyone. I may follow this up with more in depth guides or instructions on using specific applications in the SNX ecosystem; Just let me know what you would like to see.
