Synthetix eliminates SNX token inflation, reallocates resources to buybacks and burns after passing governance proposal SIP-2043

Synthetix governance has approved proposal SIP-2043, formally ending ongoing SNX token inflation and redirecting protocol economics toward fee-based buybacks and burns rather than new token issuance. The change follows a community vote in October 2023, after which newly minted SNX rewards for stakers were halted and a new rewards model based on trading-fee revenue was prepared. Inflationary SNX rewards were introduced in 2019 to kickstart staking and liquidity, and were later adjusted in 2022 to a dynamic model tied to target staking levels. As the protocol matured and inflation dropped to single-digit levels, Synthetix noted that inflation had become a weaker and more complex incentive, prompting the shift away from minting new SNX. Under the post‑SIP‑2043 design, stakers now earn from trading fees generated by Synthetix markets, and the protocol has implemented a buyback-and-burn mechanism—initially via its Andromeda release on Base—where a portion of fees (40% of net fees on Base under SIP‑345) is used to purchase SNX on the open market and permanently remove it from circulation. This transition effectively pivots Synthetix from an inflationary to a fee-driven, potentially deflationary tokenomics model, aligning token holder rewards with actual protocol usage and fee generation. By eliminating inflation, simplifying staking (no weekly claims, automatic fee-based rewards), and routing a share of fees into buybacks and burns, the protocol aims to create a more sustainable economic structure that ties SNX value more directly to trading activity and long-term protocol growth. "entities":["Synthetix","SNX","Synthetix Network Token","SIP-2043","SIP-345","Andromeda","Base","Synthetix Perps","sUSD"]}`

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Explore the topic

• Governance
• Buybacks
• Inflation
• Proposal