The term “synthetic assets” refers to the mix of assets that have the same value as other assets. Traditionally, synthetic incorporates a variety of derivatives – options, futures or swaps – that simulate the underlying asset – stocks, bonds, commodities, indices, currencies or interest rates.
For example, instead of buying shares, an investment company may buy a call option and selling a put option on the same stock. The use of synthetic asset here allows the company to make use of several financial vehicles instead of a single investment asset.
The high-end estimate for the value of all derivative contracts is upwards of $ 1.2 quadrillion – a number exponentially larger than the global real estate ($ 217 billion) global debt ($ 215 billion) global stock markets ($ 73 billion) and The world supply of gold ($ 7.7 trillion).
On the one hand, derivatives can be used to take the risk of price supports of various assets such as commodities debt. On the other hand, derivatives can promote and exacerbate market inefficiencies, encourage zero-sum game among traders rather than creating a true market value. The use of derivative products allow investors to make a profit without physical settlement, arbitrage trading, risk transfer and hedge against price fluctuations. Read more..
What crypto synthetic assets?
Cryptocurrency based synthetic assets aims to give users a different exposure to various asset without the need to hold the underlying asset. This can be anything from a fiat currency, such as the US dollar or the Japanese yen, for commodities such as gold and silver, as well as index funds or other digital assets.
By using a unique synthetic assets, investors can still hold a token which tracks the value of some assets without the need to leave the ecosystem cryptocurrency. Crypto synthetic assets also offers users all the benefits of decentralization, because they are open to all users across the border by using an intelligent secure contracts and other instruments, and the data is stored in large books distributed.
What kind of synthetic crypto existing assets?
Abra is decentralized investment platform that allows users to use them as collateral cryptocurrency to create synthetic assets. Abra synthetic asset models utilize smart contracts activated with Bitcoin (BTC) and litecoin (LTC).
In practice, if an investor wants to buy Google shares worth $ 1,000 through the Abra, the company will set a $ 1,000 from the BTC against Google’s stock price. If Google goes up or down, BTC equivalent amount will be added to or subtracted from the user’s contract.
In the example above, the investor will basically take a short position at BTC when taking a long position on Google, asset hedging. Meanwhile, Abra will take a long position at BTC while shorting Google.
Synthetix is a Ethereum-based platform that allows investors to trade cryptocurrency mint and synthetic enterprise platform peer-to-peer. It allows the user to gain access to synthetic products that simultaneously gives them exposure to non-cryptocurrency assets such as gold, USD and stocks. Currently more than $ 69 million locked in a synthetic derivative contracts.
Synthetix currently has three decentralized application: Synthetic exchange, Mintr – which allows users to share original SNX token platform so that they can get the cost and mint synths – and Dashboard that presents an overview of the whole Synthetix Network. Synthetix teams have built a publishing platform multi-tier, exchanges and other types of collateral, creating a market for asset-backed synthetic cryptocurrency. Synthetix allows the user to issue various synthetic assets, including fiat, derivatives, cryptocurrencies and different asset classes. Examples could Bitcoin, euro, USD, Tesla stocks, gold, etc.