Synthetix Network, a financial dApp that allows users to invest in synthetic assets, has raised capital from Framework Ventures and a number of other undisclosed investors. With DeFi surging, many institutions are finally seeing a potential paradigm shift and investing in these protocols. Not long ago, Andreessen Horowitz bought $15 million worth of MakerDAO’s MKR tokens, October 29, 2019.
Finding the Next Major Disruptor
Innovation in cryptocurrency and blockchain extends to many industries, but none of them have been able to replicate the magnitude of interest and effort that has gone into reforming the financial sector. At the end of the day, the contemporary ethos of cryptocurrencies is to separatee authority from money, so it makes sense for this technology to have a bigger impact on finance.
Synthetix is building a protocol that allows for capital allocation to proxy assets. Simply put, a person living in a village in Cambodia can invest in a synthetic token that represents one share of Tesla (TSLA). This was not otherwise possible, as there are no investment schemes that allow one to capture value accretion without truly holding the asset.
The protocols’ range of assets spans from major cryptocurrencies, gold, and various fiat currencies, with stocks in the pipeline. Synthetix also has directional long/short tokens for major cryptoassets and exchange tokens.
And no, this again is not random wealth creation. Some will lose, some will win, and all of the money minted on Synthetix is backed by a larger amount of collateral. Currently, the optimal collateralization ratio is 750 percent. This makes the system safe and protects it from black swans, but it also makes the agenda of financial inclusion unrealistic.
Gauging Success in Open Finance
Successful projects on Ethereum’s open finance stack have one common factor: liquidity. The robustness of this one metric speaks volumes about usage and utility for a protocol.
After deciding to move completely from EOS to Ethereum, and rebranding from Havven to Synthetix, the project has been able to grow much faster and become liquid, with over $91 million in staked assets at the time of writing. The project is third in terms of dApps with value locked in the protocol (Maker $317 million, Compound $125 million), and has seen exponential growth in all the right ways.