Synthetix proposal may end SNX inflation and reshape stake holder rights

Recently, a proposal on the Synthetix platform to terminate SNX inflation has garnered widespread attention. The proposal is currently undergoing voting, and if passed, it will mark the end of the Synthetix mining and inflation era, with SNX potentially transforming into a non-inflationary or even deflationary token.

According to Synthetix's governance structure, its core decision-making body is the Spartan Council, elected by SNX stakers. As of now, 6 council members have voted in favor of the proposal, resulting in a support rate of 100%. This indicates that the proposal is likely to pass smoothly, with the final voting ending on December 18.

If the proposal is approved, the distribution of benefits for SNX stakers and regular holders will undergo significant changes. Previously, the sources of earnings for SNX stakers included: profits and losses as a counterparty, inflation rewards, and sUSD debt destroyed through transaction fees. Under the new mechanism, the earnings for stakers will primarily come from: profits and losses as a counterparty, sUSD debt destroyed through transaction fees, and transaction fee income on the Base network.

It is worth noting that the income of SNX stakers as liquidity providers has remained relatively stable. Data shows that the profits and losses of stakers (including trading fees and profits and losses as counterparties) have shown a generally upward trend. In the most recent period, the annualized yield generated by inflation exceeded 10%, while the annualized yield from burning sUSD through trading fees exceeded 5%.

For ordinary SNX holders, this proposal may increase their equity as the downward price pressure from inflation will disappear. If another proposal currently being voted on is also passed, SNX may even enter a deflationary era.

The Synthetix platform has a high dependence on SNX staking, as the more SNX that is staked, the more synthetic assets can be minted. However, with Synthetix set to deploy a new version on the Base network, which will use USDC as collateral, this may reduce the reliance on sUSD and SNX stakers.

Synthetix has undergone multiple inflation adjustments throughout its history. From the high inflation period that began in 2019, to the gradual decrease in the inflation rate, and now possibly a complete cessation of inflation, this reflects the project's adjustments to the token economic model at different stages of development.

Overall, this proposal to end inflation will redistribute the rights between SNX stakers and regular holders. Although stakers will lose inflation rewards, stable trading fee income and new Base network revenue may still be sufficient to attract enough staking volume. At the same time, the rights of regular holders will no longer be continuously weakened by inflation. With the deployment of the new version on the Base network, the Synthetix ecosystem may usher in new development opportunities.