Synthetix Network Token
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Learn about Synthetix Network Token Staking
How to stake SNX?
There are several ways to earn a return on your SNX, including lending them out to custodial providers or through decentralized lending protocols, or staking them on the the native staking dashboard.
For the best security and control over your funds, we recommend using a Ledger Hardware Wallet. We default to staking SNX via a Ledger or Metamask wallet and the steps to do so are as follows:
Step 1: Go to the staking dashboard, and click “Connect Wallet” at the top right.
Step 2: After you’ve connected to your wallet, click on “Start Staking”.
Step 3: You will now be navigated to the staking menu, please input the amount of SNX you would like to stake, and click on the “Mint” function to proceed with confirming your transaction.
Do I need to maintain my staking in any way?
Once you have staked your SNX, there are things you need to consider going forward:
- When you “claim” in the Rewards tab on Staking dAPP you are assigned your % of SNX in an escrow record in the RewardEscrow Contract. This means your rewards will not show in your wallet address but they are assigned to your wallet address to be vested in 12 months from their claim date. You will now be able to mint from those escrowed SNX as they are also used as your collateral. So mint away if you can and compound your SNX rewards.
- While the staking rewards are escrowed for one year, you still need to manually claim your staking rewards within one week after 3-4pm UTC every Wednesday, otherwise you will lose them since they will be redistributed to other stakers.
- You won’t be able to claim rewards if your C-Ratio is below the target C-Ratio. C-Ratio (Collateralization Ratio) is a rolling, post-mint variable that constantly changes based on the stakers’ SNX value and active debt. Burn your sUSD debt to claim the week rewards if this is the case. To receive maximum rewards, ensure you are close to the target C-Ratio.
- As a participant in the Synethix Network, once you have staked your tokens, you can vote on Governance Proposals based on the amount of SNX staked. While your contribution and vote are highly valuable to the protocol, participating does not affect the sum of your rewards.
How are the rewards generated?
Staking rewards are escrowed for one year but can be claimed on a weekly basis starting from 3-4pm UTC on Wednesdays. Native staking rewards on SNX are composed of:
- Token Inflation: The part of staking rewards that is paid out in SNX tokens is enabled by the inflationary supply. The token inflation rate is set to decrease gradually until September 2023, where it will stay at 2.5% indefinitely. Read more below under the Tokenomics section.
- Trading Fees: Trading fees paid out in sUSD fees are generated whenever a user exchanges one synthetic asset (Synth) for another through Synthetix Exchange. Fees are typically between 10-100 bps (0.1%-1%), though usually 30 bps, and when generated are sent to the fee pool, where it is available to be claimed by SNX stakers based on the amount of staked tokens.
It’s important to keep in mind that the total annual rewards are distributed among all active stakers. As more tokens are staked, the reward rate decreases.
Please also be aware that custodial rewards may not always be worth the cost. Some custodians have gone bankrupt by offering high reward rates, but usually, these custodians will take a significant portion of the rewards in exchange for staking your tokens. You can use our Staking Calculator to better understand how these factors may impact your rewards.
What are the risks to staking SNX?
We strive to make staking as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular staking option is appropriate for you.
- Slashing Risk: There is no slashing risk involved when staking SNX tokens on the native staking dashboard. However, stakers need to claim their rewards once a week starting from 3-4pm UTC on Wednesdays, otherwise they will lose their rewards.
- Liquidation Risk: If the C-ratio goes under 200%, stakers can get flagged for liquidation and have 3 days to fix CR ratio to its initial requirement of 400% (Layer-1 Requirements for Ethereum mainnet) or 750% (Layer-2 Requirements for Optimism). This can happen when SNX value drops or stakers have no ability to burn active debt.
- Unbonding Risk: Your SNX tokens will be locked for 7 days after your last stake them. While your staking rewards are escrowed for one year.
- Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs, this risk applies not only to staking but also the investment in SNX.
Please note that this is not an exhaustive list of all the risks related to staking.
What is SNX?
SNX is the governance token of the Synthetix protocol. It is also the primary form of collateral backing the synthetic assets available in the Synthetix protocol.
- Staking: By staking SNX to mint sUSD (a synthetic USD token enabled by the Synthetix protocol, which tracks the price of the US Dollar) stakers can get staking rewards which are escrowed for one year.
- Governance: Synthetix is governed, maintained and built by a combination of community members, core contributors, and several elected committees and councils that are voted on by SNX stakers. For example, the Ambassador Council is responsible for promoting Synthetix’s interest in the Ethereum ecosystem. Synthetix Stakers are assigned a percentage of ownership of the Ambassador Council, in proportion to their amount of SNX staked. They can then vote on proposals through a snapshot protocol, based on their voting weight which is quadratically weighted.
What are the tokenomics of SNX?
SNX is an inflationary token, however the inflation rate decreases by 1.25% per week and will reach the final terminal annualized inflation rate of 2.5% on September 6, 2023. The gradual decremental rate and the perpetual final inflation rate were chosen by the community to prevent abrupt halving and ensure long-term stability.
Initial Token Distribution Breakdown
- Investors and Token Sales: 60.00%
- Team and Advisors: 20.00%
- Foundation: 12.00%
- Partnerships: 5.00%
- Bounties and marketing Incentives: 3.00%
From the Staking Rewards Journal