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 in agreement), which aims to terminate the 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 noted that the effectiveness of token inflation as an incentive measure was gradually diminishing, ultimately leading to the cessation of the mechanism. Synthetix plans to use transaction fees for buybacks and burns in the future, acquiring and burning SNX tokens through fees generated by the protocol to reduce the token supply.
Following these latest developments, SNX has recently surged to a yearly high, with a trading price of about $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 currently on the Ethereum and Optimism chains.
SNX 2023 Price Trends (Source: TradingView)