Why Invest in Synthetic Crypto Assets? | Crypto

Why Invest in Synthetic Crypto Assets?

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– Synthetic crypto assets are financial instruments in ERC-20 smart contracts known as Synths, which are comparable to derivatives in traditional finance.

– A derivative is defined as a financial contract that derives its value from the underlying asset, index, or interest rate.

– Synths use smart contract-based protocol to track the value of real-world assets and allow one to trade assets without actually owning them.

– Synthetic assets provide exposure to a wide range of assets that are not always accessible to the average crypto investor, such as gold and silver.

– Synthetix is a decentralized and permissionless derivatives liquidity protocol built on the blockchain.

– The ecosystem is powered by the Synthetix native token, the Synthetix Network Token (SNX).

– SNX tokens back synths value.

– SNX tokens are minted when a staker puts collateral down using a Mintr application dedicated to interacting with SNX contracts.

– If the cost of SNX increases, the system will release SNX tokens that are no longer required to ensure earlier synths.

– Synthetic assets and conventional derivatives vary primarily in tokenizing the relationship between an underlying asset and the derivative product rather than using contracts to establish the chain.

– There are multiple advantages that synthetic assets have over traditional derivatives, such as more liquidity and the ability to be sent and received using standard cryptocurrency wallets.

– However, there are some drawbacks of synthetic assets to consider as well, such as the learning curve associated with staking synths and the prohibitively expensive over-collateralization requirements.

Why Invest in Synthetic Crypto Assets?

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