Blockchains and cryptocurrencies are gradually shaping the current financial system. The industry makes it easier to explore the traditional financial system and implement new investment concepts such as synthetic crypto assets. By definition, synthetic assets refer to a combination of assets that possess the same value as another asset. Synthetics mainly act as derivatives, assets that obtain value from other underlying assets like stocks or securities. Crypto synthetic assets, therefore, adopt a similar approach since they are tokenized derivatives imitating the value of another asset. Interested parties can invest in any asset through crypto synths without moving out of the crypto ecosystem. How Crypto Synthetics Work As mentioned earlier, synths allow users to own tokenized derivatives. The idea behind tokenization is to digitize an asset on a blockchain network. Hence, owning the tokenized synthetic asset will be similar to holding the actual asset. For instance, investors may be interested in trading Tesla stocks without holding the TSLA asset. In this case, users can opt to trade a synthetic TSLA which acts as the actual asset. Blockchains play a vital role in the crypto synthetic market. The network’s underlying technology makes synthetic assets legitimate through digital certificates or tokens. Having a digital token or certificate proves that an investor owns the respective real-world asset. Blockchain further provid...
