Synthetix Considers Ending SNX Inflation to Reshape Stakeholder Rights

Recently, the Synthetix community is voting on a proposal to terminate SNX token inflation. If the proposal is approved, it will mark the end of the Synthetix mining and inflation era, and SNX may also transform into a blue-chip token with no inflation or even deflation.

Currently, the proposal is being voted on the Snapshot platform. As of the morning of December 11, 6 members of the Spartan committee have voted in support, with a support rate of 100%. The final voting will end on December 18. It is worth noting that starting from December 21, the proposal will take effect, and users will no longer be able to receive inflation rewards.

If the proposal is approved, the权益 structure of SNX stakers will change. Previously, stakers could earn profits and losses as counterparties, inflation rewards, and sUSD debt destroyed through transaction fees. After the proposal is approved, the权益 of stakers will include profits and losses as counterparties, sUSD debt destroyed through transaction fees, and transaction fee income on the Base network.

Data shows that the earnings of SNX stakers have been steadily increasing. In the most recent period (from November 30 to December 6), the annualized yield from inflation exceeded 10%, while the annualized yield from burning sUSD through trading fees surpassed 5%.

This proposal takes into account that current inflation has significantly decreased, and Synthetix v3 is about to be deployed on the Base network, which may bring new sources of revenue. Another proposal currently being voted on suggests using 50% of the fees generated on the Base network to repurchase and burn SNX, with the remaining 50% allocated to liquidity providers.

For ordinary SNX holders, if the proposal is passed, their rights will be enhanced as the downward price pressure caused by inflation will disappear. If another proposal is also passed, SNX may even enter a deflationary era.

Synthetix has always placed great importance on maintaining a high stake rate. Whether it is the original synthetic assets or the current perpetual contracts, there needs to be a sufficient volume of synthetic assets. sUSD, as an "endogenous collateral stablecoin," requires a 500% collateralization rate for its minting, which also means that the more SNX is staked, the more synthetic assets can be minted.

However, with the deployment of the Andromeda version of Synthetix on the Base network, USDC will be used as collateral, which may reduce the reliance on sUSD and SNX stakeholders.

Since its establishment, Synthetix has made multiple adjustments to its inflation strategy. From the initial high inflation to attract funds for staking, to gradually reducing the inflation rate, and now considering completely ending inflation, it reflects the project's strategic adjustments at different stages of development.

Overall, the proposal to end inflation means a redistribution of rights between SNX stakers and regular token holders. The proposal is likely to pass, which will eliminate the inflation incentives for SNX staking, while the rights of regular token holders will no longer be continuously weakened by inflation. Nonetheless, the earnings of SNX stakers as counterparties and the fee income remain relatively stable, which may continue to attract sufficient staking volumes. With the deployment of the new version on the Base network, the project's reliance on sUSD and stakers may decrease, while also bringing new sources of income to stakers.