Synthetix founder Kain Warwick will launch an ‘Inverse BTC’ token and an ‘Inverse ETH’ token within weeks.
It’s shorting made simple – if you buy the iBTC token and Bitcoin’s price goes down, you can sell it back for more money than you paid. The same goes for iETH. If ETH goes down, the value of iETH goes up.
Warwick is the man behind Blueshyft – a company that’s processed more than $100 million in payments for exchanges including Binance Lite and CoinSpot.
His latest venture, the Sydney-based Synthetix (the project formerly known as Havven) will also introduce leveraged trading on a raft of synthetic assets, indices and derivatives in the coming months – from tokens tied to the price of gold or Bitcoin to stablecoins based on the Ruble and Rupee.
“You can take a leveraged position, long or short on the top 50 assets,” he says of his forthcoming exchange offering. “If you want to short Tether you can – just as a random example – if Tether does collapse. Things like that aren’t possible anywhere else.”
Warwick says the exchange will blend the best aspects of Bitmex and Uniswap by combining derivatives with a pooled collateral model.
So that’s why they’re called ‘synthetic’?
Unlike security tokens, synthetic versions do not represent ownership of actual commodities or cryptocurrencies themselves – they are merely tied to the same value. “You don’t own any gold,” Warwick says of the Synthetic Gold token. “It’s purely synthetic exposure to gold as an asset. It’s not backed by physical gold and you can’t redeem it – that’s actually very expensive and cumbersome and creates liquidity issues.”
So basically, it’s a quick and easy way to be able to make money out of the price movements of cryptocurrencies, commodities, foreign currencies and derivatives without the hassle of actually owning stuff. It also allows you to swap between various tokens instantly, without finding a buyer.
Synthetix is rebadged Havven
The Synthetix Exchange dApp already allows users to swap between various synthetic tokens without requiring a counterparty (though its still very much a work in progress).
Synthetix is the rebadged name for Haaven – which became Australia’s most successful ICO in February 2018 raising $39 million, mostly from institutional investors.
Given the many concerns surrounding Tether, many investors were drawn to the idea of a more transparent and decentralized stablecoin along the lines of Dai.
Launching a stablecoin is the easy part however. Keeping it stable is the tricky bit. The Synthethic US Dollar (sUSD) is currently trading at a small discount to the actual US dollar.
“It’s challenging to keep the peg obviously, given liquidity and interest in the space. The challenge for decentralized stable coins is how to generate demand. There’s not enough demand (at present) so we’re trading at a 3-4% discount at the moment.”
There are 1.1 million sUSD in circulation, with SNX token holders able to ‘mint’ their own sUSD.
Warwick explains the company’s efforts now are wholly focused on stimulating demand. “The reason we pivoted to a synthetic exchange idea was that by giving people exposure to Bitcoin, for example, we’ll get demand. And as demand grows, that will help to maintain the peg.”
Offering an easy way to short Bitcoin and other cryptocurrencies seems potentially very popular, but that’s not their only idea. Synthetix has expanded its offering with 15 stablecoins pegged to everything from the Aussie and Singapore dollars to the Russian Ruble. They’re also launching synthetic cryptocurrencies (they have $250,000 in sBTC already) and synthetic commodities including gold and silver. These are backed by the Synthetix Network Token (SNX).
The ability to swap instantly between synthetic tokens is a major drawcard, Warwick says. “One of the nice things about a synthetic exchange is all of the assets are backed by a single collateral token (SNX) so swapping between the synthetic tokens is seamless. In a synthetic exchange you don’t need to buy from a counterparty who is a seller – you simply convert the tokens and pay a small fee to the SNX holders who provide the service.”
Despite selling out the retail component of their ICO in about an hour and a half last year, the long dark crypto winter took its toll on the project. The initial $39 million marketcap has been reduced to less than $5 million today. Warwick says they are conscious of their burn rate and have “a couple of year’s runway”.
He says the project’s backers have maintained the faith. “I think the main reason is we have executed our roadmap much faster than almost every other project in the space. That’s allowed us to get things to market and test them, which unfortunately in crypto doesn’t usually happen as fast as it should.”
So while not everything’s worked out, they’ve learnt and refined their ideas as they released various iterations.
“I think confidence in our ability to execute has never been higher,” he says.
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