According to The Block, the community members of decentralized derivatives trading protocol Synthetix have approved governance proposal SIP-2043 (with over half of the Spartan Council members in agreement). The proposal aims to terminate the inflation of Synthetix’s native token, SNX.
With the cessation of token inflation, Synthetix will adopt new strategies, including token buybacks and burning. These strategies will be implemented in the upcoming Andromeda version of the protocol. As a result, Synthetix stakers will no longer need to claim weekly inflation rewards in SNX, and transaction fees will be automatically burned.
The initial introduction of inflation rewards was intended to incentivize liquidity and growth, but the core team has pointed out that the effectiveness of token inflation as an incentive measure has gradually diminished, ultimately leading to the discontinuation of this mechanism. Synthetix plans to use transaction fees for token buybacks and burning, reducing the token supply by acquiring and burning SNX tokens through fees generated by the protocol.
Following these recent developments, SNX has reached a yearly high, with a trading price of approximately $4.64 at the time of writing, representing a growth of over 20% in the past week.
Synthetix facilitates decentralized derivatives trading through its liquidity pools, with a total value locked (TVL) of over $890 million on the Ethereum and Optimism chains.
SNX price trend for 2023 (Source: TradingView)
