DeFi
Synthetic Asset
A token whose value is derived from and tracks the price of another asset, without owning that asset directly.
Last Updated
2026-03-19
Related Concepts
What is Synthetic Asset?
A synthetic asset is a blockchain token that replicates the price movements of another asset stock, commodity, or currency without requiring direct ownership. It provides on-chain price exposure to off-chain assets.
How does Synthetic Asset work?
- A user deposits overcollateralized cryptocurrency into a smart contract.
- The contract mints synthetic tokens representing the target asset's price.
- Oracles continuously feed real-time price data to keep the synthetic pegged.
- Arbitrageurs maintain the peg if the synthetic trades below real price, they buy and redeem for profit.
- If collateral falls below the required ratio, the position is liquidated.
Why does Synthetic Asset matter?
It brings any tradeable asset on-chain without intermediaries. A DeFi user can gain exposure to gold, Tesla stock, or forex pairs without leaving the blockchain ecosystem.
Key features of Synthetic Asset
- Price tracking via oracle feeds, not direct ownership
- Overcollateralized to protect against liquidation
- Composable usable in other DeFi protocols
- Arbitrage-enforced peg maintenance
Examples of Synthetic Asset
- Synthetix enables synthetics for crypto, stocks, and commodities using SNX as collateral.
- Mirror Protocol creates synthetic stocks tracked by Chainlink price feeds.
- dYdX offers synthetic perpetual futures with leveraged price exposure.