The synthetic asset protocol improves the utilization rate of DeFi assets, expands asset types, provides liquidity, lowers market entry barriers, and expands user participation.

Although DeFi was popular last year, the market has continued to the present, and the market has a certain degree of awareness of DeFi, and some people have even become familiar with farming on smart chains such as Ethereum and BSC to obtain income. However, for some users, there is a threshold for using synthetic assets, and the protocol itself is currently limited to simple synthetic "stock" and "cryptocurrency" assets.

What are synthetic assets?

Synthetic assets are financial instruments designed to mimic any other financial instrument, customized to suit an investor's specific purpose.

All synthetic assets are financial derivatives, but not all derivatives are synthetic assets. Including options, futures and other financial derivatives based on the value of underlying assets.

In the crypto market, synthetic asset protocols include Synthetix, UMA, XCarnival, etc. Although the same track, each has its own strengths and needs to meet different needs.

Synthetix is ​​a decentralized synthetic asset protocol built on Ethereum. It uses oracle machines to move the data of off-chain assets to the chain, and then achieves price anchoring through ultra-high mortgage rates.

Unlike Synthetix, which uses oracles to feed prices and anchor prices, UMA tries to build an Ethereum-based financial contract infrastructure, which consists of two parts, a data verification mechanism DVM and a financial contract design without price feed.

XCarnival, the first time-limited auction liquidation mechanism, is different from the previous two, XCarinval uses two functional modules (XBroker, XArena) to allow users to obtain admission chips through mortgage loans without buying.

XCarnival will help users solve two types of practical problems: 1. How to mortgage assets, especially digital assets with poor liquidity (such as NFT, etc.) and long-tail assets (such as various sub-mainstream digital currencies) Obtain additional liquidity (stable currency); 2. How to create and issue interesting financial products (prediction games) or participate as a player.

XCarnival hopes to create a product gathering place with various ideas and fun.

The Importance of Synthetic Asset Protocols in the DeFi World

The synthetic asset protocol improves the utilization rate of DeFi assets, expands asset types, provides liquidity, lowers market entry barriers, and expands user participation.

DeFi’s difficult gameplay from the beginning has gradually diversified and become more interesting as the market demands. What is different from other projects is that both parties to the mortgage and lender are users, and the pricing is completely left to the market to decide. However, XCarnival pioneered the time-limited auction liquidation mechanism. , the platform will automatically auction the mortgaged NFT. If the selling price exceeds the lending funds, the lender will make money. If the auction fails, the mortgaged NFT will belong to the lender. This concept is borrowed from pawnshops.

epilogue

epilogue

Synthetic assets are still in their infancy, but they play an important role and are also a key component of the DeFi field. We need to explore more innovative and interesting gameplay and mechanisms to meet the needs of the market and users.