According to a report from “The Block,” the community members of the decentralized derivatives trading protocol Synthetix have approved governance proposal SIP-2043 (with over half of the Spartan Council members agreeing), which aims to end inflation of Synthetix’s native token SNX.
With the halt of token inflation, Synthetix will adopt new strategies, including token buybacks and burns. These strategies will be implemented in the upcoming Andromeda release of the protocol. As a result, Synthetix stakers will no longer need to claim weekly SNX inflation rewards, as fees will be automatically burned.
The initial introduction of inflation rewards was meant to incentivize liquidity and growth, but the core team pointed out that token inflation “as an incentive mechanism was gradually diminishing in effect,” ultimately leading to the cessation of the mechanism. Synthetix plans to use transaction fees for buybacks and burns in the future, reducing the token supply by acquiring and burning SNX tokens with fees generated by the protocol.
Following these latest developments, SNX has recently surged to a yearly high, with a trading price of around $4.64 at the time of writing, representing a more than 20% increase in the past week.
Synthetix facilitates decentralized derivatives trading through its liquidity pools, with a total value locked (TVL) of over $8.9 billion on the Ethereum and Optimism chains.
SNX 2023 Price Trend (Source: TradingView)