​​Synthetic Wealth? SNX 🏎 or 🍜

Synthetix aka Havven - a successful pivot into the product-market fit or just a narrative PnD.

Who is that SNX beast sitting at 200 million on CMC and almost 100x from the bottom? From 2M to 200M, damn! It's rebranded Havven which raised 30M at the beginning of 2018. Coming from a stablecoin market - the company made a pivot which resulted in booming growth in 2019. So what do they do?

Synthethic assets. You can lock up the collateral and issue a synthetic asset. You won't be able to issue a CyberTruck on-chain, but you can get exposure to Tesla stock without owning it. This includes iXTZ, iETH, iBTC, and so on. After all, you are doing it as a money-making game, not to actually have ownership of it. You can read more here: https://docs.ethhub.io/built-on-ethereum/open-finance/synthetix/. It's like MakerDao: you lock up ETH and now other assets with the arrival of MCD and issue Dai.

Lobster, are you shilling us a shitcoin? Ha! First of all, clap to founders for taking a better turn - if you measure success in USD and CMC, then you can say they did it / are doing it. However, Bitconnect was also going up. And it wouldn't be Blockchain Lobsters if there was not some unconventional scrutiny and fucking. Let's dive it.

1. Only SNX as collateral 🤢

The choice of collateral is very important, because you need something very liquid, moderately stable, and widely accepted. Now imagine I were to go back in time and as a bank issue dollars not by backing it with gold something that is widely trusted with no exceptions - but with the apples in my garden. A pretty messed up thing to do, right? Well, if you own the market, you can dictate what is worthy and what is not. In this market, only SNX can be used as collateral. And why is it bad?

PS update: this issue was brought up by XNS community, some ideas can be found here: https://github.com/Synthetixio/synthetix/issues/232

2. 750% collateralization ratio & no liquidation 😨

Imagine you want to issue Dai 1:1 USD and lock up ETH. If ETH goes down, you get liquidated and that ETH is used to support Dai price 1:1 USD. Now take a low liquidity coin and try to use it as collateral - you end up with moonlambo as you see on the charts. But it should be the other way around as well then? Well, no. SNX does not yet have liquidation. Meaning the system can be very much under-collateralized if the token goes down.

So how do they try to solve the incentives? You get to mint rewards if f you maintain more than 750% collateralization ratio. Holders are incentivized to mint more sUSD or other assets just to stay above 750% or buy up more. And if they are under 750%... they just can't touch their collateral. Or they just go leverage by buying more SNX. Have to say, the sUSD / ETH Uniswap pool is quite nice though 1200 real ETH, and if you bought SNX lower'ish, you would have made a fuuuuuuc load of money. Just on that synthetic side.

3. SNX Inflation goes from March 2019 but locked till March 2020 📉

Ye, to prevent dumping, they lock up the rewards this way - but let them be used to mint synthetic assets. And after all, I am not even talking about the oracle problem.

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They are trying to give SNX intrinsic value ok boomer when it does not have one - but as we have seen with bigcaps, which have even less value if the meme goes on - SNX will become one and could get that muh intrinsic value. Apart from LINK-XRP identical shilling armies across discord, twitter, and telegram - the approach was novel and quite cool. Now I would use UMA for synthetic assets instead - more trustless and actual collateral the market can trust.

Congrats to those who enjoyed the ride up! Don't intend this as FUD, but a few things looked suspicious to me.