Synthetix allows synthetic assets (Synths) to be minted against the value of SNX tokens. This is done by locking SNX into a smart contract as collateral at a ratio of 500% to the Synths minted. For example, this means that if 1000 SNX is locked at a value of $0.10 USD, 20 sUSD can be minted against it. 500% has been chosen to provide ample protection against price fluctuations.
Your Collateralisation Ratio affects the proportion you receive of fees generated by Synth transactions. If your Ratio drops below 500%, you receive fewer fees, which you can read more about here
. This is to incentivise SNX holders from maintaining the entire Network Collateralisation Ratio (i.e. value of total locked SNX against value of total Synths) as well as keeping Synth prices stable.