Synthetix to end SNX token inflation, shift focus to buybacks and burns

The community members at derivatives protocol Synthetix have approved a governance proposal SIP-2043, aimed at terminating SNX +4.44% token inflation.

The cessation of inflation will lead to the adoption of new strategies, including token buybacks and burns, set to be implemented in the protocol’s forthcoming Andromeda software release.

Consequently, Synthetix stakers will no longer be required to claim weekly inflationary token rewards.

Initially, inflationary rewards were introduced to encourage liquidity and growth, but the core team noted that token inflation “became less effective as an incentive, leading to their termination.”

Moving forward, the project plans to use trading fees for buybacks and burns, reducing the token supply by using protocol-generated fees to acquire and burn SNX tokens.

SNX token price | Source: The Block

After the latest development, the Synthetix token has rallied to its yearly high. It trades at $4.75, signifying an 8% increase for the day, according to The Block's price page. The token has a supply of about 328 million and a fully diluted market capitalization of $1.5 billion.

Synthetix facilitates decentralized derivatives trading through its liquidity pools, which currently hold a total value locked in excess of $890 million across both the Ethereum and the Optimism Layer 2 network.