How does sUSD work?

sUSD is a synthetic asset created on the Synthetix platform. It is minted against the value of the native SNX token which acts as the primary form of collateral backing synthetic assets available on Synthetix. All Synths are currently backed by a 400% collateralizatoin ratio, though this can change through future governance proposals. SNX stakers incur debt when they mint Synths and burn Synths to exit the system. SNX holders are incentivized to stake their SNX token to earn their proportional fees each week, as well as inflationary rewards. Stakers are unable to claim fees if the value of their collateralization ratio falls below 400%, which ensures Synths are backed by sufficient collateral to absorb large price movements.

Why trade sUSD?

Synthetic assets like sUSD provide users with exposure to USD without holding the underlying asset. This offers a major benefit in terms of lowering friction when swapping between different assets. All Synth trades are executed against the contract, or known as peer-to-contract trading. sUSD always remains constant at 1 USD, and can be converted into other Synths using the Kwenta trading platform. This provides infinite liquidity up to the total amount of collateral in the system, zero slippage and permissionless on-chain trading.

How secure is sUSD?

sUSD can be minted permissionlessly through the platform and does not have any reliance on centralized entities like WBTC. A risk to be aware of involves the debt SNX holders issue when they stake their SNX and mint sUSD. This debt can fluctuate due to price movements within the system, which means that stakers may ultimately have to burn more sUSD than they originally minted to exit the system and unlock their staked SNX. Lastly, there are still a number of system functions that are still centralized such as the use of proxy contracts which provides greater control to the engineering team to ensure contracts can be easily upgraded.