Synthetic Asset

The equivalent of derivatives from the traditional market in the crypto space is synthetic assets. Similar to how a derivative derives its value from the underlying asset or index, synthetic assets represent some other assets using DeFi blockchain networks to establish the relationships. These relationships are established in the form of tokens. Synthetic assets have mirrored the role of derivatives from the traditional market and are allowing traders to buy digital assets representing popular commodities or stocks.

DeFi and derivatives serve as a mutually beneficial pair since they make the access to commodities available to both institutional and retail investors in the same manner difficult. Many backend operations can be automated with the help of smart contracts.

There are several advantages of synthetic assets, such as funding becoming a lot easier with these tokens. Injection of liquidity in the market becomes faster with these assets. There are zero barriers to entry since the crypto market is an open space, irrespective of borders and regulations. Such a market is virtually accessible to anyone who wishes to buy synthetic assets.

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