Synthetic Asset

Tokenized derivatives are essentially what synthetic assets are. Derivatives are fictitious representations of stocks or bonds that a trader wants to purchase or sell but does not actually possess. In essence, you can use a derivative to make money off changes in the price of a stock that you do not own. By adding the derivative’s record to the blockchain and essentially turning it into a cryptocurrency token, synthetic assets, or tokenized derivatives, advance this process.

In essence, synthetic assets establish a blockchain record of the connection between the buyer and the underlying asset. In the realm of cryptocurrencies, derivatives are becoming more and more common since they enable investors to speculate on the price movements of different tokens without actually holding any of those tokens in their wallets. In this regard, synthetic assets acquire popularity among DeFi aficionados by introducing a tool used by conventional traders to the crypto sphere.