Glossary · S
Synthetic Asset
A tokenised representation of a real-world or other crypto asset created by DeFi protocols. Synthetix allows minting of synths (sETH, sBTC, sEUR) by depositing SNX collateral. Synthetic assets let DeFi users gain price exposure to assets they cannot easily access on-chain (equities, commodities, forex) without holding the underlying. Synthetix V3 and GMX Synthetics are the main synthetic asset platforms in DeFi.
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How Synthetic Asset works in practice
A synthetic asset tracks the price of something without holding it. It provides exposure to assets that cannot easily be brought on-chain — equities, commodities, indices — through collateral and an oracle rather than custody.
Worked example
A synthetic gold token tracks the gold price using an oracle, backed by crypto collateral rather than bullion. Holders get the price exposure; nobody holds any gold.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
The synthetic is only as good as its oracle and its collateral. If the oracle is manipulated or the collateral falls below what backs the position, the peg to the reference asset breaks — and there is no physical asset to redeem against.
Synthetic Asset: common questions
- What is Synthetic Asset?
- A tokenised representation of a real-world or other crypto asset created by DeFi protocols. Synthetix allows minting of synths (sETH, sBTC, sEUR) by depositing SNX collateral. Synthetic assets let DeFi users gain price exposure to assets they cannot easily access on-chain (equities, commodities, forex) without holding the underlying. Synthetix V3 and GMX Synthetics are the main synthetic asset platforms in DeFi.
- How does Synthetic Asset work in practice?
- A synthetic asset tracks the price of something without holding it. It provides exposure to assets that cannot easily be brought on-chain — equities, commodities, indices — through collateral and an oracle rather than custody.
- Can you give an example of Synthetic Asset?
- A synthetic gold token tracks the gold price using an oracle, backed by crypto collateral rather than bullion. Holders get the price exposure; nobody holds any gold.
- What do people get wrong about Synthetic Asset?
- The synthetic is only as good as its oracle and its collateral. If the oracle is manipulated or the collateral falls below what backs the position, the peg to the reference asset breaks — and there is no physical asset to redeem against.