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Synthetic Assets

asset type

On-Chain Representation of External Value ÔÇö Synthetic Asset

A synthetic asset is a blockchain-based token designed to mimic the price and behavior of a real-world asset ÔÇö such as fiat currency, commodities, stocks, or other crypto. These tokens are created using collateral and smart contracts, allowing users to gain exposure to external markets without actually owning the underlying asset.

Use Case: Synthetic assets allow users to trade the price action of gold, $BTC, $USD, or even real estate ÔÇö all from within a blockchain environment.

Key Concepts: Price Pegging, Collateralization, On-Chain Derivatives, Oracle Feeds, FAssets

 

Examples of Synthetic Assets:

  • $sUSD ÔÇö Synthetic U.S. dollar backed by collateral (e.g., on Synthetix)
  • $sBTC ÔÇö Synthetic Bitcoin that mirrors BTCÔÇÖs price on-chain
  • $fXRP / $fDOGE ÔÇö FAssets minted on Songbird to represent XRP and DOGE with smart contract compatibility
  • $GLD ÔÇö Synthetic gold token reflecting the price of physical gold
  • $KAG ÔÇö Not synthetic: Tokenized silver backed 1:1 by audited physical metal in vaults, issued by Kinesis
  • $TSLA ÔÇö Synthetic Tesla stock offered by mirror protocols or derivatives platforms

FAsset Minting Workflow (User Example):

  • User mints $fXRP on Songbird by locking XRP through the minting interface
  • $fXRP is then used across DeFi apps or held in a wallet on SGB
  • Via BiFrost, user can swap $fXRP back into $XRP, $SGB, or $FLR
  • Slippage and swap fees are expected to improve as the system fully transitions to the Flare mainnet

Why Synthetic Assets Matter:

  • Open up access to traditional markets without intermediaries
  • Allow 24/7 exposure to real-world assets inside crypto ecosystems
  • Enable programmable trading strategies across DeFi platforms
 

Real-World Assets vs. Synthetic Assets

Feature Real-World Assets (RWAs) Synthetic Assets
Backed By Physical or legal claim to real asset Derivatives, smart contracts, oracles
Examples KAG (silver), Propy (real estate) sETH, sTSLA, Mirror Assets
Redeemability Often redeemable for real asset Not redeemable ÔÇö price-pegged only
Risk Profile Lower risk, tied to physical asset Higher risk, oracle/manipulation risk
Use Case On-chain real asset exposure Speculation, derivatives, leverage
 
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