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Synthetic Asset
A crypto-based token designed to track the price of another asset without directly holding it.
A synthetic asset is a token designed to track the price of an underlying asset — such as a stock, commodity, or another cryptocurrency — without the issuer directly holding that underlying asset, typically through collateralization and price-feed mechanisms instead.
This can provide exposure to an asset's price without needing to hold it directly, but introduces reliance on the synthetic protocol's collateral backing and oracle price feeds.
Examples
- A synthetic asset might track a stock's price without the protocol actually holding shares of that stock.
- Synthetic assets depend on accurate oracle price feeds to track their target correctly.