Synthetix, the prominent decentralized finance platform, recently announced a pivotal decision with the successful implementation of the Synthetix Improvement Proposal (SIP) 2043 by the governance. This event marks the end of SNX token inflation, a significant change impacting both token holders and liquidity providers.
The history of SNX token inflation dates back to 2019 when it was introduced to strengthen staking and foster protocol growth following the transition from Havven. However, in 2022, inflationary rewards were adjusted to a dynamic system responding to staker behavior. Despite these efforts, the effectiveness of inflation as an incentive diminished over time, leading to the implementation of SIP 2043 and, consequently, the end of SNX token inflation.
$SNX Inflation? Not anymore. Synthetix Governance has slashed it to 0️⃣.
Get ready for a straightforward staking experience – No weekly claims for stakers, and non-stakers benefit from buyback and burn.
Inflation was transitory, but only for Synthetix.https://t.co/4eyNwcEsuv
— Synthetix ⚔️ (@synthetix_io) December 11, 2023
The uniqueness of its inflationary model lay in the distribution of inflationary rewards among all healthy stakers through staking rewards. However, this approach, although unique in the decentralized finance space, caused confusion among some users due to the complexity associated with staking and inflation.
Synthetix Redesigns its Rewards Structure
Following the implementation of SIP 2043, Synthetix redesigned its rewards structure. Now, both stakers and non-stakers benefit from these changes. Stakers, on one hand, receive a free loan in sUSD against their SNX collateral, along with the automatic burning of fees generated by the protocol’s trading activity. Additionally, a buyback and burn strategy was introduced to reduce the supply of SNX tokens, starting with the upcoming Andromeda upgrade.
This transformation marks a new beginning for Synthetix, moving away from reliance on inflation as an incentive and focusing on more sustainable strategies. With the continuous growth of trading fees, Synthetix Perps generated over 28.5 million in 2023, signaling a shift towards a more sustainable economic model without the need for inflationary incentives.
Synthetix has just entered a new phase, simplifying staking, improving the user experience, and establishing a more efficient and sustainable model for the protocol. According to the latest data from CoinMarketCap, SNX is trading at $4.7 per unit, with a modest growth of 1.88% in the last day.