Berlin, July 19, 2021 — The International Token Standardization Association released a list with all existing Synthetix (SNX) derivative tokens in the Tokenbase. Most of these tokens offer investment opportunities in popular commodities and stocks such as Petroleum or Tesla without the need of a central clearing unit. All transactions are recorded on the Ethereum blockchain. For now, the list contains 67 different tokens which range from cryptocurrencies to indexes, inverses, and real-world assets like gold. Sythetix was created on the Ethereum network under the ERC-20 standard and soon became one of the most popular DeFi applications. As of today, Synthetix’s total value locked (TVL) has reached almost 1B$, making it the most popular DeFi derivative platform according to Defi Pulse.
Authors: Christian Viehof, Maximilan Bruckner
Synthetix is a DeFi application on top of the Ethereum blockchain for the issuance of synthetic assets with a total value locked of around 1B$. Analogous to derivatives in traditional finance, synthetic assets are financial instruments in the form of ERC-20 smart contracts that provide the returns of another asset without requiring you to actually hold it. Synthetix’s native token, the Synthetix Network Token (SNX), is used to provide collateral against the derivative tokens that are issued.
Figure 1: Total value locked in DeFi derivative networks (Source: https://defipulse.com/)
For the pricing of their derivative tokens, Synthetix uses decentralized oracles which serve as bridges between the Synthetix network and the outside world for pricing information. Oracles like Chainlink (LINK) track the prices of the assets represented, allowing users to buy and sell Synthetix derivative tokens as if they actually own the underlying assets. In this manner, Synthetix derivative tokens provide exposure to assets normally inaccessible to the average crypto investor. Examples are crude oil or the NIKKEI Index. Since Synthetix derivative tokens are issued on Ethereum, you can deposit them on decentralized exchanges (DEXs) such as Curve and Uniswap and use them to provide liquidity and earn interest. Synthetix has recently announced that it will be implementing the layer 2 solution Optimism on its platform in order to reduce transaction costs and to make the platform more accessible to retail investors.
Currently, layer 2 platforms are the most significant growth factor in DeFi. Layer 2 platforms use various technologies such as plasma, sidechains or rollups to process transactions off the Ethereum main chain. They periodically update data about the state of smart contracts and accounts, handling far greater throughput than Ethereum. Layer 2 platforms alleviate traffic on the Ethereum network, with the added bonus of significantly lower fees. With the surge of layer 2 solutions, the number of token addresses is likely to see exponential growth. Our last week’s article about USDC showcased why it is important to identify tokens on a token layer instead of an asset layer, as each of those USDC tokens runs on a different blockchain. The same will be the case for Synthetix on Optimism, which plans to initially support synthetic ether (sETH), synthetic bitcoin (sBTC), and synthetic link (sLINK). Again, each of those tokens will be indistinguishable in value compared to their counterparts running on the Ethereum mainnet, but each of them will feature an individual token address creating the need for additional identifiers. The Synthetix Tokenbase list, as seen in figure 2, will be updated once Synthetix has started offering its services on Optimism. Synthetix, just like USDC, proves that identifiers such as the ITIN will be a necessity for future digital assets, especially as interchain operability and the integration of layer 2 solutions progresses.
Figure 2: Tokenbase list with all Synthetix derivative tokens (Source: https://bit.ly/3rnfzE5)
Figure 3: The Synthetix Tokenbase entry (Source: https://itin.itsa.global/X1CQCP3J7)
Economic Purpose (EEP): Synthetix is listed as a Settlement and Governance Token (EEP22TU03) due to its design as a means of collateral combined with governance functionality.
Industry Type (EIN): The issuer of Synthetix is active in the field of Decentralized Derivatives, Synthetic Assets and Insurance (EIN06DF03).
Technological Setup (TTS): Synthetix runs under the Ethereum ERC-20 Standard (TTS42ET01) as an application layer token on top of the Ethereum blockchain.
Legal Clam (LLC): Synthetix does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. Synthetix’s platform is built by a team of programmers and engineers that make up the core contributor community. It’s Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information of the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). Synthetix qualifies as an Utility Token (REU52) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
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Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.
Maximilian Bruckner is Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He has a strong international background with significant time spent in Spain, South Africa, and Canada. Currently pursuing studies at the Frankfurt School of Finance and Management, you can contact him via firstname.lastname@example.org and connect on LinkedIn if you would like to further discuss ITSA e.V. or have any other open questions.