• Crypto Lists
  • Bitcoin
  • Blockchain
  • Cryptocurrency
  • Altcoin
  • Advertise With Us
  • Join our Telegram Community
Newsletter
ItsBlockchain
  • Bitcoin
    Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

    Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

    Bitcoin ETFs could have the same result as CME group futures launch in 2017

    Bitcoin ETFs could have the same result as CME group futures launch in 2017

    featured image

    How Bitcoin can be hacked?

    keep bitcoin safe

    Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats

    featured image

    Bitcoin IRA – Everything You Need to Know

    A trillion dollar tsunami is about to hit Bitcoin

    A trillion dollar tsunami is about to hit Bitcoin

    featured image

    Why Bitcoin will always be the number one cryptocurrency? Explained

    Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

    Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

    On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

    On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

    Trending Tags

    • Crypto Gems
    • NFT
    • DEFI
    • Crypto Lists
    • Altcoin
    • Crypto Market
    • Guide
    • IBC Capital
    No Result
    View All Result
    • Bitcoin
      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      Is the Russia-Ukraine War the Biggest Test for Bitcoin? Market Update

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      Bitcoin ETFs could have the same result as CME group futures launch in 2017

      featured image

      How Bitcoin can be hacked?

      keep bitcoin safe

      Keep Your Bitcoins Safe: All You Need to Know About Crypto-Cyberthreats

      featured image

      Bitcoin IRA – Everything You Need to Know

      A trillion dollar tsunami is about to hit Bitcoin

      A trillion dollar tsunami is about to hit Bitcoin

      featured image

      Why Bitcoin will always be the number one cryptocurrency? Explained

      Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

      Crypto markets mirror Wall Street’s fall- Loses 100 billion in 24 hours and Delta Plus Variant creates extreme fear

      On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

      On-chain shows Divergence against Bearish Price-Action, But Bitcoin continues to stay in the Re-Accumulation Phase

      Trending Tags

      • Crypto Gems
      • NFT
      • DEFI
      • Crypto Lists
      • Altcoin
      • Crypto Market
      • Guide
      • IBC Capital
      No Result
      View All Result
      ItsBlockchain
      No Result
      View All Result
      Home Guide

      What are Crypto Synthetic Assets? Explained

      Karthik Guttha by Karthik Guttha
      July 23, 2021
      in Guide
      0 0
      0
      crypto synthetic assets
      99
      SHARES
      1.2k
      VIEWS
      Share on FacebookShare on Twitter

      What are Crypto Synthetic Assets, and How they are shaping the future of finance? we will talk about this in this comprehensive guide.

      The world of DeFi is impacting lives in ways we could never imagine. It is growing at an unbelievable pace, with new protocols expanding the ecosystem. Until now, we have seen projects produce decentralized applications with similar functionalities as traditional financial products. We see traders swap tokens, lend a fraction of their share in the money market, and participate in exchanges using margin and leverage. 

      But that is not where DeFi ends. We can go much further with decentralized blockchain networks and build applications that turn everything we know about financial markets upside down. The first and most popular example is Crypto Synthetic Assets. 

      By simulating the growth of another asset, synthetic crypto assets provide opportunities for everyone with little to no barriers to entry. Synthetic assets have a unique digital representation of a derivative with a little DeFi twist, and it derives value from the underlying stocks, currencies, and commodities. In this article, we will discuss different aspects of Synthetic assets and explore the top five protocols leading the way in shaping the future of crypto finance 

      What are Synthetic Assets? 

      Synthetic assets closely resemble derivatives of any traditional market. As a derivative derives value from its underlying asset/index, it is tied to that particular asset in the form of a contract. In the same way, synthetic assets represent some other asset, but it uses Defi blockchain networks to establish that relationship in the form of tokens. 

      By mirroring the role of traditional derivatives, synthetic assets are now enabling traders and investors to buy digital assets that represent and track popular stocks or commodities. For example- the recent Gamestop incident can be used to derive new synthetic assets and track their price using an off-chain verification system via oracles. 

       Why Defi and Derivatives a mutually beneficial pair? 

      If there was no open finance movement, we would not have fractional ownership of an asset. You cannot buy a piece of land and earn good returns. You cannot increase your yield by investing in real-world assets like stocks or precious metals. 

      With DeFi in play, we are now witnessing the broadening of horizons in the crypto finance ecosystem. Defi and Derivatives form a mutually beneficial pair because they make difficult-to-access commodities available to both retail and institutional investors in the same way. 

      By leveraging smart contracts, we can automate many backend operations and make the exchange platform immutable. Without Defi, trading derivatives from any part of the world would be challenging, so having that ability to incorporate borderless transactions and enabling everyone in the world makes it the best relationship in crypto finance. 

      Advantages of Synthetic of Assets 

      We all know some basic advantages of synthetics assets like permissionless creation or no central party risk. But there are so many untapped use-cases associated with synthetic assets. Here are four major advantages of synthetic assets: 

      Tokenization makes any asset tradable 

      Synthetic assets unlock new markets in the world of finance and create new sources of value. It is done by tokenizing assets existing in the traditional markets. You can create a permissionless token out of anything and trade without a central figure. For example, if you want to create a token and track Co2 released by the industry, you can use new synthetic asset tokenization. 

      Synthetic assets can make funding a lot easier 

      In the initial stages, it is hard to find liquidity providers for new assets, but when it comes to obtaining funds via loan- synthetics are the best solution. A party can raise funds by using their existing assets and giving counterparties good interest rates. This is a lot like secured loans, as the party requiring funds agrees to buy securities and buy them back later. 

      Synthetic assets can inject liquidity much faster 

      The first thing any investor does before buying a considerable amount of stocks or contracts has checked the liquidity of that particular market. With synthetic assets, investors do not have to worry about liquidity. Their costs will be reduced as well. The derivative contract used for injecting liquidity at a much faster rate is a credit default swap. With buyers hedging their exposure and buyers going long on the underlying asset, the liquidity drastically improves in a short period of time. 

      Zero Barriers to Entry 

      In an open market like crypto, it doesn’t matter from which location and country to participate. It is virtually accessible to everyone that wishes to buy synthetic assets. With fewer barriers to entry in this space, it allows investors from all walks of life to create cash flows by having fractional or complete ownership of their desired financial instruments. 

      Few Examples of Synthetic Assets 

      It is not necessary that synthetic assets only replicate stocks or other derivatives, it can also be any crypto-native assets. We can create contracts on many factors and track its progress to make profits from each token. Here are few examples that can give you a better idea about synthetic assets: 

      Hash-Power & Mining Capacity Swaps 

      Managing mining machines and operating them every day may not be your cup of tea, so you should check out synthetic hash rate-based assets. Retail investors can benefit from investing in such assets, as it is impossible to work with equipment at a large scale. Synthetic assets can even issue machine tokens to virtually represent a part of the mining machine. These are beneficial for both traders and miners, as they can balance their portfolios in a better way and hedge against any risks in future.

      Stocks & Indexes 

      As we mentioned earlier, physical assets can be tokenized using synthetic assets, including stocks, indexes, and even debt instruments like bonds. If we take the S & P 500 index and make a token out of it, traders buying would profit with a higher return as the index goes up. We have seen Mirror Protocol declare S&P 500 as a synthetic asset on their platform just a couple of months back, so it can be done with any stock and financial instrument. 

      Poop Exchange 

      To help you understand how permissionless synthetic assets can be, we have chosen poop exchange as an example. A synthetic asset designed to track the frequency of poop sightings in San Francisco was created in 2019 by a few developers. It sounds funny and is hilarious, but it also showcases the potential of synthetic assets and their ability to create new markets. 

      Staking Yield Swaps 

      This is similar to a hash-power contract, as it helps miners and other participants in the proof-of-stake network to hedge their market exposure. In the case of Staking yield swaps, a validator would trade a fraction of their yield for cash. This is a win-win for both buyers and sellers, as the buyer gets required staking income without having any infrastructure, and the seller would receive a fixed amount. 

      Top 5 Synthetic Asset Protocols in 2021 

      DEUS Finance price today, DEUS live marketcap, chart, and info |  CoinMarketCap

      DEUS Finance 

      DEUS Finance is one of the finest protocols we have in this segment of the crypto market. It delivers an immersive experience to its users by providing global access to all marketplaces. From currencies like the US dollar or The Japanese Yes to precious metals like gold, DEUS fiance got you covered. 

      DEUS Finance has become one such platform that every crypto user should check out by eliminating intermediaries and adding a touch of decentralisation. On their platform, synthetic assets are called “dAssets” and are pegged at a 1:1 ratio. Recently, the company launched the protocol on the XDAI blockchain and BSC is also being considered. 

      UMA price today, UMA live marketcap, chart, and info | CoinMarketCap

      UMA 

      If we want to accelerate crypto adoption in all aspects, we need to see more retail participating in the derivatives market with fewer risks attached. One of the best ways to do that is to buy synthetic assets representing the underlying value from an open-source protocol like UMA. Its open-source nature helps build trust and makes everything more transparent. 

      With the help of UMA, any two parties can create custom financial contracts and launch ERC-20 tokens on Ethereum’s blockchain. Having Ethereum’s smart contracts and incentive options, these contracts are secured in every way possible. By eliminating legal frameworks/recourse, UMA delivers a trustless, permissionless mechanism for all its users. 

      Dafi - Rewarding Networks

      DAFI Protocol

      DAFI is a protocol incubated by the Royal Bank of Scotland, and it aims to solve hyperinflationary token models once and for all. DAFI is a unique platform for its synthetic asset creation and its ability to solve a burning issue in the cryptocurrency market. It has various products to tackle the problems caused by hyperinflation and encourages blockchain projects to mint tokens after depositing a small amount of their total original token supply. 

      The only thing bothering traders is that it is not possible to monetize tokens on the DAFI exchange. While this helps in sustaining a healthy token economy, it is not doing any good for traders. In recent memory, DAFI has partnered with Gather and Razor and has added many more networks under its belt. 

      Abra system. All about cryptocurrency - BitcoinWiki

      ABRA 

      Abra is the OG of synthetic assets. It is without a doubt one of the top protocols leading crypto synthetics worldwide. Founded in 2014, the platform made it possible for users to earn interest on top cryptos and stable coins. It is one of those well-recognized platforms that people from both developed and developing countries respect and use on a regular basis. 

      The platform elevates user experience by adding different personalized services and packages. Institutional investors can borrow in many forms with flexible loan terms. In terms of liquidity, there is nothing to worry about, as it has deeper liquidity that can give you better prices with less slippage. 

      Synthetix ⚔️ (@synthetix_io) | Twitter

      Synthetix 

      Synthetix is a one of a kind protocol that is the backbone to derivatives trading in Defi and crypto. Kwenta is Synthetix’s DEX, which allows you to buy assets from cryptos to real-world physical items like gold. As Synthetix is an ethereum-based protocol, you have to deposit your tokens on Defi platforms like Curve or Uniswap. 

      In terms of governance, the company had shifted from a not-for-profit foundation to three DAOs in 2020. By enabling users to access all world assets in a censorship-resistant way, Synthetix is among the pack leading synthetic asset protocols in 2021. 

      Closing Thoughts 

      Synthetic assets are new possibilities made possible by the maturation of Ethereum and the decentralized finance ecosystem. As more people become aware of how blockchain technology and smart contracts play a role in decentralization, the popularity will undoubtedly increase. It will be interesting to see which platforms gain immense popularity in the future and who makes the most out of this space.

      While Bitcoin and the underlying blockchain technology is undeniably a groundbreaking innovation, creating a system of synthetic assets that can mirror real-world assets can be seen as one of the most important applications of the technology. Now is the time to bring the technology to those who could benefit from it

      Karthik Guttha

      Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.

      IBC-Transparent-Logo-(1)

      Subscribe To Our Newsletter

      Join our mailing list to receive Cryptocurrency investing and trading recommendations to your mailbox.

      You have Successfully Subscribed!

      Tags: featured
      Share40Tweet25Share10

      Subscribe to get notified on latest posts.

      Unsubscribe

      Related Posts

      A Complete Beginners Guide to Decentraland

      A Complete Beginners Guide to Decentraland

      by Hitesh Malviya
      January 29, 2022
      0

      Decentraland is a decentralized virtual world where you can buy, sell, and build digital real estate, artwork, and non-fungible tokens...

      How to Play Axie Infinity: Ultimate Beginner’s Guide

      How to Play Axie Infinity: Ultimate Beginner’s Guide

      by Hitesh Malviya
      December 7, 2021
      0

      Axie Infinity, a play-to-earn game inspired by the popular video game franchise Pokemon, was released in 2018 by Vietnamese developer...

      Everything You Need to Know about NFTs, and Metaverse: A Complete Guide

      Everything You Need to Know about NFTs, and Metaverse: A Complete Guide

      by Karthik Guttha
      December 6, 2021
      0

      Everything You Need to Know about NFTs, and Metaverse: A Complete Guide One science fiction-inspired idea that could become a...

      zed run

      A Beginner’s Guide to Zed Run: Digital Horse Racing NFT Game

      by Hitesh Malviya
      August 26, 2021
      0

      There’s a reason why NFTs are all the rage. After all, they are tokens that can be used to denote...

      See how effortlessly you can get ahead in crypto with on-chain analysis. Learn now!

      See how effortlessly you can get ahead in crypto with on-chain analysis. Learn now!

      by Karthik Guttha
      August 18, 2021
      0

      In this detailed guide, we will discuss crypto on chain analysis, top 5 tools, top 3 analysts, and many more....

      Load More

      About Us

      We curate the best cryptocurrency projects with the intention of adding value for investors through the process of selecting, organizing, and looking after different projects available in the cryptocurrency market.

      • Trending
      • Comments
      • Latest
      Top 5 upcoming Token Airdrops (Step-by-Step Guides)

      Top 5 upcoming Token Airdrops (Step-by-Step Guides)

      November 22, 2022
      featured image

      List of leading partners of Ripple, and How they use XRP?

      February 2, 2021
      Top crypto coins for 2018

      Top 25 crypto coins to Buy in 2018 [UPDATED]

      October 4, 2018
      Top 5 DeFi Projects on Tezos

      Top 5 DeFi Projects on Tezos

      December 26, 2022
      crypto traders 2021

      Top 5 Crypto traders to follow on Twitter in 2021

      May 29, 2021
      Top 10 Ways to Make Money in Crypto

      Top 10 Ways to Make Money in Crypto

      October 19, 2022
      ATOM Set to Explode after the Revised Tokenomics

      ATOM Set to Explode after the Revised Tokenomics

      October 14, 2022
      EIP-4844 Explained | The Biggest Ethereum Upgrade

      EIP-4844 Explained | The Biggest Ethereum Upgrade

      February 7, 2023
      What Blockchain Can Learn From Barnes & Noble and the Jacksonville Jaguars

      What Blockchain Can Learn From Barnes & Noble and the Jacksonville Jaguars

      January 17, 2023
      RINO Enterprise Wallet launches free Community Edition

      RINO Enterprise Wallet launches free Community Edition

      January 14, 2023
      Top 5 DeFi Projects on Tezos

      Top 5 DeFi Projects on Tezos

      December 26, 2022
      Modular Blockchains: The Next Big Thing in Web3

      Modular Blockchains: The Next Big Thing in Web3

      December 12, 2022
      A Dummy’s Guide to Ethereum Rollups

      A Dummy’s Guide to Ethereum Rollups

      November 30, 2022
      Tezos Blockchain is Always Under the Radar but Continues to Excel

      Tezos Blockchain is Always Under the Radar but Continues to Excel

      November 22, 2022
      • Top 10 Cheap Cryptocurrencies with Huge Potential in 2021 | Best Penny Crypto Coins

        Top 10 Cheap Cryptocurrencies with Huge Potential in 2021 | Best Penny Crypto Coins

        29620 shares
        Share 11837 Tweet 7398
      • A Mysterious Bitcoin Whale who sold 3000 Bitcoins at 58K$, Bought back 3521 Bitcoins in the last three days

        9925 shares
        Share 3969 Tweet 2481
      • Top 10 Low market cap altcoins to invest in 2021

        7260 shares
        Share 2902 Tweet 1814
      • Top 10 NFT Crypto Projects You Should Know

        7257 shares
        Share 2620 Tweet 1638
      • List of leading partners of Ripple, and How they use XRP?

        6053 shares
        Share 2421 Tweet 1513
      ItsBlockchain

      We are India’s first and oldest Blockchain & Cryptocurrency publication platform started in 2016. We are a one-stop destination for technical analysis, cryptocurrency recommendations, and Blockchain technology resources.

      Buying Guides

      • Buy Bitcoins in India
      • Buy Bitcoins in China
      • Buy bitcoins in Russia
      • Buy Bitcoins in Japan
      • Buy Bitcoins in Turkey

      Important Links

      • Home
      • About US
      • Privacy Policy
      • Promote Your ICO
      • Submit post

      Follow Us

      Contact us

      support@itsblockchain.com

      © 2020 itsblockchain.com - Designed and maintained by Fanatic Coders

      No Result
      View All Result
      • Bitcoin
      • Crypto Gems
      • NFT
      • DEFI
      • Crypto Lists
      • Altcoin
      • Crypto Market
      • Guide
      • IBC Capital

      © 2020 itsblockchain.com - Designed and maintained by Fanatic Coders

      Login to your account below

      Forgotten Password?

      Fill the forms bellow to register

      All fields are required. Log In

      Retrieve your password

      Please enter your username or email address to reset your password.

      Log In
      This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.