Everyday, new concepts and protocols are introduced to Crypto World. Today, we are going to mainly to talk about Synthetic Assets and Tokens. Let’s firstly, look at what are Synthetic Assets. Basically, they are financial instruments that simulate or imitate other instruments while changing key characteristics. For example, here might be a Synthetic Asset relying on the price of Oil or etc. In that way traders get profit from price changes of stocks that they don’t actually own.
Crypto synthetic assets – Now we have imagination of what synthetic assets are, let’s move forward to Crypto Synthetic Assets. They are similar to traditional ones, the difference is they are just
tokenized derivatives. With the use of these cryptocurrency derivatives, investors may profit from changes in the value of various tokens without actually holding any of those tokens.
When it comes to reasons for buying Synthetic Asset, it is mainly for those who are unable or unwilling to hold the original asset. Consider that you want to hold USD on a blockchain. Only use of
synthetic tokens you can bring a real USD on-chain. You can sell synthetic onchain-USD for other tokens follow the same steps with selling a normal token, if done right.
What are risks of having synthetic assets? Synthetic assets get their prices from Oracles (Oracles are information sources that bring information from off the blockchain (off-chain) data sources and place it on the blockchain (on-chain) for usage by smart contracts). Since, oracles are not centralized, it is possible to manipulate how it works. So that, when choosing a platform for Synthetic Assets, traders have to be careful.
What are main platforms for Crypto Synthetic Assets?
Abra – Abra is a cryptocurrency wallet that allows users to buy, sell and hold 25 cryptocurrencies and 50 fiat currencies in one place. It supports some of the most popular cryptocurrency assets,
including Bitcoin, Ethereum, Ripple, Litecoin, Stellar and more.
Synthetix – Synthetix is an Ethereum-based protocol that tokenizes underlying assets ranging from commodities to fiat money. It then issues them as derivative, synthetic assets. Synthetix bridges the gap between off-chain world and on-chain digital assets, creating a blockchain derivatives market.
UMA – UMA is a platform for creating crypto derivatives that operate like traditional derivatives, and which are native to Ethereum. Without needing to go through a broker, creating a futures contract for the price of gold becomes as simple as buying or minting an ERC-20 asset called a synthetic token.