- Synthetix passed a governance proposal to end SNX token inflation and adopt buybacks and burns in order to reduce supply and increase value.
- Inflationary rewards that previously encouraged growth are ending, so stakers will no longer receive weekly rewards and new token minting will halt.
- Fees will now fund token buybacks and burns to reduce total supply over time, potentially increasing SNX scarcity and value for holders.
Synthetix, a leading decentralized derivatives protocol, has approved a governance proposal to end SNX token inflation and adopt new strategies like buybacks and burns. This shift aims to reduce token supply and potentially increase value.
Ending SNX Inflation
Synthetix passed proposal SIP-2043 to terminate SNX token inflation. Previously, inflationary rewards encouraged network growth, but became less effective over time.
With inflation ending, stakers will no longer receive weekly inflationary rewards. The supply increase from minting new tokens will halt.
New Strategies: Buybacks and Burns
Without inflation, Synthetix plans to use trading fees for token buybacks and burns. This will reduce total supply by acquiring and burning SNX.
Buybacks use protocol fees to buy SNX tokens on the open market. The purchased tokens are then burned, permanently removing them from circulation.
Over time, buybacks and burns are expected to reduce the SNX supply and increase scarcity, potentially benefiting holders.
Market Reaction
After the proposal, SNX price spiked to its yearly high around $4.75. This rally signifies confidence in the new direction for network incentives and tokenomics.
Synthetix currently facilitates over $890 million in decentralized derivatives trading volume across Ethereum and Optimistic rollups. The shift to buybacks aims to further grow the protocol and value of SNX long-term.
