Intro to Synthetic Assets
Synthetic assets represent one of the most innovative applications of blockchain technology in decentralized finance. In this article we explain how synthetic assets work within the SEXP ecosystem.
What Are Synthetic Assets?
Synthetic assets (or "synths") are tokenized derivatives that mirror the value of real-world assets without requiring you to actually own the underlying asset. This means you can gain exposure to stocks, commodities, currencies, and indices entirely on-chain.
Imagine you want exposure to the price of gold, Tesla stock (TSLA), or the Euro (EUR) without actually having to buy and hold the physical gold, the stock certificate, or the foreign currency. That's where synthetic assets come in.
In the context of SEXP, synthetic assets (also called "synths") are blockchain-based tokens that track the price of another asset. They derive their value from the real-world asset they represent but don't require you to hold the underlying asset itself.
Think of it like a derivative, but living entirely on the blockchain. For example:
sUSD: Tracks the US Dollar.
sBTC: Tracks the price of Bitcoin.
sEUR: Tracks the price of the Euro.
sXAU: Tracks the price of Gold.
How Does SEXP Create Synths?
The SEXP protocol doesn't magically pull these assets onto the blockchain. Instead, it uses a clever system based on collateralization and oracles:
- Collateral Backing: Users stake SEXP token as collateral in the protocol.
- Minting Process: By staking SEXP, users can mint synthetic assets called synths, with the value of these synths being backed by the overcollateralized SEXP.
- Price Oracles: Our own SEXP oracles provide real-time price feeds that ensure synths accurately track the price of their real-world counterparts.
Benefits of our Approach
The SEXP model offers several advantages:
- Global Access: Anyone with an internet connection can gain exposure to traditional financial assets without geographical restrictions or centralized intermediaries.
- Infinite Liquidity: Users trade directly with the protocol, eliminating the need for counterparties when trading synths.
- Zero Slippage: Trade any amount of synths without price impact, as prices are determined by oracles rather than liquidity pools.
- Novel Assets: The protocol can create synthetic assets that might not exist elsewhere in traditional markets.
The Future of Synthetic Assets
The SEXP platform launches with a wide range of synthetic crypto assets, representing the most frequently traded cryptocurrencies. In the future, the protocol could support other assets from traditional finance like stocks or rare metals, or even entirely new assets.
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