Assets that hold the same value as another asset are known as synthetic assets. Traditionally, synthetic assets combine numerous derivatives(swaps, options, futures) that imitate an underlying asset(bonds, indexes, stocks, commodities).
In the crypto industry, synthetic assets are known as crypto synths: Tokenized derivatives of an underlying asset. Crypto synths could be described as a combination of cryptocurrencies and traditional derivative assets.
The value of a derivative is linked to another asset such as a stock or bond in traditional finance. Traders can speculate on the movement of an asset without holding its ownership in the Finance industry. In the crypto space, a real-world asset is tokenized on a Blockchain, and a digital certificate is provided as proof of ownership.
Thus, the concept of digital fractional ownership has unlocked a door of opportunities for DeFi development experts by helping them create a digital version of real word assets and commodities.
This blog sheds light on the perks of utilizing crypto synthetic assets in the DeFi industry and the top crypto synth protocols available in the market.
Benefits Offered By Crypto Synths to the DeFi Development Experts
Here are some benefits of utilizing crypto synthetic assets in the DeFi space:
- Enhanced Flexibility
Crypto synths enable investors to gain exposure to a wide variety of assets like bonds, stocks, currencies, commodities, and more without buying the underlying asset. It’s easy for DeFi investors to customize their trading portfolios and update investment plans as per their financial business goals.
- Improved Liquidity
Crypto Synths exchange platforms offer more liquidity and lower underlying cost for traders as compared to traditional assets exchange platforms. Crypto synthetic assets are an ideal investment option for DeFi development experts looking to speculate on the price movements of assets.
- Reduced Transaction Cost
Rather than physical purchases, crypto synths are developed through financial contracts. Hence, assets could be traded at a lower transaction cost compared to traditional derivatives. DeFi investors looking to cut costs linked with investments must utilize crypto synthetic assets.
- No Intermediary Involvement
Crypto synthetic assets are created through minting. During the trading of crypto synths, the “buy” asset is minted and an equal value of the “sold” asset is burned. Thus, the value between synthetic assets could be exchanged without the need for any physical counterparty.
Top Crypto Synths Exchange Platforms
Many exchange platforms have emerged over the past few years considering the popularity of crypto synthetic assets to meet investors’ demand. Here are some popular crypto exchange platforms that help DeFi development experts buy and sell crypto synthetic assets with utmost ease and convenience:
- Synthetix
Synthetix is one of the renowned DeFi protocols that allow users to create and trade synthetic assets on the Ethereum Blockchain. In addition to enabling the issuance of synthetic assets, Synthetix also supports commodities such as silver, gold, synthetic cryptocurrency indexes, synthetic inverse cryptocurrencies, synthetic fiat currencies, and many more.
- UMA(Universal Market Access)
UMA is based on a “provably honest oracle” mechanism to help users create their financial products on their own terms. Just like ETFs(Exchange-traded funds), tokenized derivatives created on UMA are based on the ERC-20 protocol. UMA is working with the goal to empower the adoption of crypto in the derivatives market and make users aware of the potential of crypto synthetic assets.
- Abra
Abra allows users to utilize their cryptocurrency as collateral to develop crypto synths conveniently. As a top decentralized investment platform, Abra leverages Bitcoin and Litecoin-enabled smart contracts. Apart from synthetic asset development, Abra also provides P2P Blockchain-powered mobile payment services to users.
- MakerDAO
MakerDAO empowers investors to utilize Ethereum as collateral to mint a synthetic asset known as DAI: a stablecoin based on Ethereum whose value is kept as close to one USD. Investors can get a detailed understanding of the value of traditional assets with MakerDAO.
Final Thoughts
To conclude, the concept of crypto synths will slowly but surely gain momentum in the coming days due to two primary reasons: security and traceability. Trades are recorded on a Blockchain-based ledger that ensures traders’ security and anonymity. DeFi development experts must capitalize on this opportunity provided by crypto synths to make a mark in the current financial paradigm. Those finding it challenging to understand the concept must also get in touch with trusted DeFi development services providers like Antier for more clarity.
Antier is a top-tier DeFi development company that helps businesses in the DeFi space develop crypto synths as per their business requirements. The company also provides crypto synthetic exchange platform development services to provide users with a seamless trading experience.
Since its inception, Antier has served numerous clients from diverse industry verticals such as healthcare, finance, logistics, banking, and more with advanced DeFi development services. Get in touch with our DeFi development experts to share your crypto synthetic asset development requirements today.
