Synthetic assets will provide users with access to a wide variety of assets without having to hold the underlying asset. Can be anything from fiat currencies or commodities like gold and silver, as well as index funds or other digital assets. By using these unique synthetic assets, investors can still hold tokens that track the value of several assets without leaving the crypto ecosystem. So what Synthetic Asset platforms are on the market today?
Synthetix is an Ethereum-based platform that allows users to mint and also trade synthetic cryptos on its peer-to-peer platform. In this model, investors gain access to synthetic assets that concurrently give them exposure to non-crypto assets such as gold, USD, and securities.
For example, a user can set up a crypto synthetic product using an underlying asset, say Ethereum. So, the user will mint the sEth token, which adjusts according to the price of Ethereum crypto. Currently, the platform has more than $69 million locked-in synthetic derivative contracts.
To make it easy for users to invest, Synthetix has three decentralized apps. They include:
- The Synthetix exchange – allows users to exchange minted synthetic assets (Synths) without counterparties directly.
- Mintr – enable users to stake the platform’s native SNX token. In turn, the users earn fees and can mint synthetic assets using cryptocurrencies.
- Dashboard – offers an overview of the entire Synthetix network.
Universal Market Access (UMA)
UMA is a decentralized platform for financial contracts. It uses self-executing smart contracts and a “provably honest oracle” mechanism to enable users to create financial products using ERC20 tokens and other protocols. In essence, the platform can be used by two counterparties to create unique financial products that give them exposure to real-world assets in a similar format as Exchange Traded Funds (ETFs).
What’s unique about UMA is that their contracts are secured by economic incentives alone. This aspect works in perfect collaboration with the platform’s self-executing smart contracts that automate trades.
Abra is a decentralized investment platform that allows investors to use their cryptocurrencies as collateral to create synthetic assets. The platform’s model leverages smart contracts enabled by Bitcoin (BTC) and Litecoin (LTC).
To use Abra, all you have to do is download the app and take a short position on BTC or LTC, which means the platform gets to be in a long position. As with many traditional synthetic products, Abra then hedges the risk of price movement by borrowing an equal amount of crypto assets from a broker.
For example, say, you want to buy XY stocks worth $500. You’ll be required to collateralize your cryptocurrency, say BTC, worth the same amount as the stocks you intend to buy. The platform will then peg your BTC against the XY stock price. If the price goes up/down, an equivalent amount of BTC will be added or subtracted from your account.
Crypto synthetic assets are here to change the derivative market by opening it up to retail investors through decentralization. This way, cry investors can trade traditional assets by collateralizing their holdings while remaining in the crypto-market space the whole time. Most importantly, the decentralization brought by the crypto synthetic assets platforms will open up the global derivative market to all classes of investors. In the long run, this will have a ripple effect on the traditional financial market as more investors trade crypto derivative products.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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