By
Temitope Olatunji
April 18th, 2024
The fundraising round of Synthetix is the first time when the project directly governed by a DAO raises funds. Investing in Synthetix, Coinbase Ventures, Paradigm, and IOSG are bringing something valuable to the project.
One of the largest token trading platforms Synthetix has raised as much as $12 million from Coinbase Ventures, Paradigm, and IOSG. According to the company, it will use the funds to provide liquidity as SNX collateral through the purchase of SNX tokens that will “participate in its rapidly evolving community governance system”.
Paradigm investment partner Arjun Balaji commented:
“We’re excited about supporting the synthetixDAO as it builds the leading synthetic asset platform. Synthetix has one of the best communities in crypto and we’re glad to be a part of it.”
More Details on Synthetix that Is Supported by Coinbase Ventures and Paradigm
Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. The protocol uses a multi-token infrastructure that implies a system of collateral, staking, inflation, and fees. It has two types of tokens — the main Synthetix Network Token (SNX) and synthetic assets (Synths). SNX is the utility feature of Synthetix that collateralizes synthetic assets. Meanwhile, they represent other real assets such as shares, fiat currencies, commodities, or cryptocurrencies. This pooled collateral model allows users to trade synthetic assets directly without the need for direct counterparties. In addition, it solves liquidity and slippage issues.
Furthermore, Synthetix is controled by a decentralized automatic organization (DAO). It allows the project to run without a traditional corporate structure. Originally, the Synthetix Foundation ran the protocol. However, starting from last year, three decentralized autonomous organizations (DAOs) take care of it. The protocolDAO controls protocol upgrades and Synthetix’s smart contracts. Further, the grantsDAO funds public goods on Synthetix, and the synthetixDAO funds entities advancing the network’s development.
As of July 2020, Synthetix is one of the largest Ethereum-based DeFi protocols. Its on-chain collateral is worth more than $350 million.
Mutual Benefits for Venture Capital Firms and DAO Protocols
Notably, the fundraising round of Synthetix is the first time when the project directly governed by a DAO raises funds. The major investors of Synthetix were Coinbase Ventures, Paradigm, and IOSG, all are the venture capital firms. According to Jordan Momtazi, a core contributor to Synthetix DAO, the main issue is to choose the right funds to work with.
Momtazi said:
“Many VC’s don’t add much value. The delta between quality VC’s and the rest is quite large.”
And seems that Synthetix has managed to do it. Investing in Synthetix, all Coinbase Ventures, Paradigm, and IOSG are bringing something valuable to the project.
For example, IOSG assisted in the hiring of a regional head in China in a bid to help Synthetix expand into China. Paradigm has used its network and in-house HR to help the protocol recruit talent for the expansion. Meanwhile, Coinbase Ventures helped the protocol connect across many functions within and outside the organization.