The Rise of Synthetic Assets in Decentralized Finance (DeFi)

3 comments

faiz1971813.982 days ago3 min read

Hi hivers, Faiz is here, and first of all you need to visit my revipus post in which I have shared information regaridng leverage effects. Do you think decentralized finance is limited to borrowing, lending, and trading? Then you are wrong. Innovation is happening continuously; that is what matters, and synthetic tokens are changing many things in transparency, freedom, and global-level accessibility. In these synthetic tokens, commodities, fiat, and stocks are included. It sounds very interesting, so let's talk more about it in easy language.

Now, understand what a synthetic token is, so you are seeing physical gold, but you can see it is available online in the market for trading, and you can buy and hold it virtually. Without entering in traditional financial system, you can do it with decentralized finance. It became more interesting when crypto and decentralization entered this field. This concept is similar to tokenization, but it includes all the financial features and some advanced features too with DeFi.

Now let's talk about what you really need? So you only need the DeFi wallet and internet connection, and everything will start. The benefit is that anyone can access these synthetic tokens from any corner of the world with just two simple requirements, and there is no country barrier. Wanna access global stock and commodities even if that is not available for your country? Now it has become a reality because of a synthetic token. Crypto is solving many issues in real life.

Portfolio diversification made easy with synthetic tokens, which means if you are an investor of DeFi, then you are not limited to crypto tokens with volatility because you have the option of synthetic tokens. Because what is happening is that they are not leaving blockchain and are also getting the benefits of the world's stable traditional markets. So you can say that the new bond is created between the crypto market and the traditional market around the globe.

However, there is a risk involved. Synthetic tokens rely on price oracles because oracles feed data to the blockchain network from the real world. If you are regularly following my blogs, then I have shared details regarding "what is Oracle?" The failure can happen with it, which is why it can be risky. The second big problem is regulation, so both things are difficult, but they are not without a solution. Things are evolving in the synthetic tokesn and new developments are happening.

All we need is more maturity in the DeFi (decentralized finance) ecosystem, and all the problems will start to solve themselves automatically. So things in DeFi are looking easy, but in reality, they are not easy. I hope that in the future we will be able to enjoy the benefits of synthetic tokens in DeFi without any hesitation or difficulty. So what do you want to say regarding synthetic tokens and Defi? Share your viewpoints in the comments. I always appreciate those who share my posts because it motivates me a lot, so I hope you will help motivate me. Looking forward to meeting you again tomorrow with a fresh topic, guys.