The founder of Synthetix, a popular platform in the decentralized finance (DeFi) world, recently proposed that the supply of its native token be capped at 300 million.
This is because the protocol is now generating revenue from a number of other products.
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A governance proposal was put forth on Friday by Synthetix’s founder, Kain Warwick. He stated that the initial reason for maintaining an ever-inflationary supply of the SNX token was no longer applicable.
He said that the protocol was now able to use its atomic swap and perpetual products for generating substantial yields.
The founder said that bootstrapping the network had been the aim behind inflation and it has done this job quite well.
Warwick stated that this was the right time to make the move, given that they were just a couple of weeks away from the 300 million mark.
Decentralized finance (DeFi) involves trading, lending and other financial activities that are conducted on the blockchain without the involvement of a middleman.
Based on the Ethereum blockchain, Synthetix is one of the first DeFi apps to be introduced. The protocol specializes in the minting and creation of synthetic tokens and an atomic swaps product was recently launched.
This allowed the daily trading volume of the Synthetix platform to go past the $200 million mark, shortly after being introduced.
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Thanks to the new offering, the platform has been able to generate a weekly fee of about $158,000 and users also receive a part of this fee.
Users stake collateral through the SNX token and then mint a synthetic asset. They are granted rewards based on the number of SNX tokens they stake.
However, Warwick said that selling pressure was seen because of the continuous creation and issuance of the token to the platform users.
The founder said that inflation is handy for redistribution of the network’s ownership to the ones who are staking the coins.
But, he added that at the same time, it also reduces the fee yield in dollars, which is paid in sUSD, for every SNX token.
He said that this results in putting the price of the SNX token constantly under downward pressure. This pressure is created despite the fact that the rewards are locked for a year before they are released to the users.
This is because holders could bet against, or short SNX prices through crypto exchanges that offer SNX-tracked futures.
The current circulating supply of the SNX token in the decentralized finance (DeFi) world is about 293 million tokens.
The proposal intends to issue around 674,873.920 tokens on a weekly basis until the total supply of the SNX tokens hits the 300 million mark, at which point it will be capped.
If there have to be any additional modifications in the supply of the SNX token, they would have to be backed unanimously by the holders of the token.
This could happen if there is a change in the future conditions of the market.