The Synthetix Protocol

Synthetix is a decentralized liquidity layer on Ethereum and Optimism that serves as a liquidity backend for some of the most exciting protocols in DeFi.

Stakers provide liquidity, which collateralizes a suite of synthetic assets, and in return, earn rewards and market yields. This liquidity underwrites the trading of synthetic assets and perpetual futures at oracle prices, eliminating the need for traditional order books and counterparties. As a result, liquidity is composable and fungible across markets, and conventional slippage is removed.

Synthetix liquidity currently supports two primary synthetic assets: spot synths and perpetual futures:

• Spot Synths track the value of real-world assets, such as cryptocurrencies, fiat currencies, and commodities, allowing users to gain exposure to various assets without holding the underlying assets

• Perps is a decentralized perpetual futures exchange utilizing Synthetix liquidity to be the counterparty to traders, with deep liquidity and low fees. Stakers (Perp LP's) are exposed to the combined performance of all traders, as well as earning trading fees.

  • Off-chain oracles reduce fees to 5-10bps, and risk management tools ensure market neutrality over the long term.

  • Funding rate and premium/discount mechanisms incentivize traders to balance markets to become delta neutral.

Synthetix supports robust liquidity and derivatives, which has led to the development of some of the most innovative and interesting DeFi protocols built on top of Synthetix, comprising the Synthetix Ecosystem.

Synthetix Litepaper