Penta Lab: Synthetix—the leader in decentralized derivatives

Project name: Synthetix Network

Token:  SNX

Current market capitalization: $1.19 billion

6months Estimated market capitalization: $972 million

Upside: -18%< /p>

PentaTen Dimension Score: 75

Data as of >: February 20, 2024

Full report download: pentalab.io

Decentralized derivatives trackTVL ranks first and transaction fee income ranks third. Synthetix serves as a decentralized liquidity layer that provides back-end services such as liquidity for DEXs built on its ecosystem. It allows users to mortgage and issue synthetic assets in the protocol, such as cryptocurrencies, RWA assets, and indices. and legal tender, etc. The properties of synthetic assets can provide users with more choices in trading asset types, deeper liquidity, fewer fees and no transaction slippage. According to Token Terminal data, as of February 20, 2024, Synthetix ranked first in the decentralized derivatives track with a TVL of US$715 million, and transaction fee income ranked third with a scale of nearly US$16 million.

Transformation DeFi infrastructure, Synthetix ecosystem is becoming more mature. Synthetix serves as a back-end service provider, enabling liquidity and shared counterparties for all front-end platforms built on its protocol infrastructure. The front-end trading platforms in the ecosystem include Kwenta, Decentrex, Lyra, Polynomial, Atomic Swap, etc. Among them, Kwenta has the largest transaction volume and contributes the most revenue to the entire protocol. After the launch of Synthetix Perps V2 in December 2022, the transaction volume on the Kwenta platform has grown explosively, achieving outstanding results of more than 40 billion US dollars in transaction volume and more than 30 million US dollars in revenue in 2023.

V3The version upgrade is coming soon, unlocking growth potential again. The current V3 version has entered the Alpha testing stage and introduced more functions for users: such as realizing the pledge of multiple collaterals including ERC20 tokens, improving the flexibility of pledge and risk management capabilities for LPs; realizing The cross-chain function creates a fully interoperable derivatives market trading system for traders; provides users with a series of tools and resources to build their own applications on Synthetix, including documentation, contracts, guides and SDK, and simplifies the construction process , stimulate innovation.

Valuation: The TVL currently deployed by Synthetix on Ethereum and Optimism has reached US$460 million and US$270 million respectively. We expect the TVL of Ethereum to remain at US$460 million in six months. Optimism has returned to its historical peak of US$330 million. The newly launched Base chain can bring an incremental TVL of US$20 million, resulting in a six-month TVL estimate of US$810 million. The current market capitalization/TVL ratio that is most relevant to market capitalization is 1.7 times, which is one standard deviation above the average since August 2019. Although we recognize Synthetix’s solid leadership in the synthetic track and its deflationary monetary economics, we are worried about its long-term competitiveness with other sustainable assets DEX, and that breakthroughs in TVL and transaction volume growth must rely on new chains. Therefore, we give an average market capitalization/TVL ratio of 1.2 and obtain a six-month target market capitalization of US$972 million, which represents an 18% downside compared to the current market capitalization.

Main risks: Ecological development falls short of expectations, competition on the track intensifies, and the drop in SNX prices triggers chain liquidations.