Ivan on Tech Academy provides latest insights and reports about the blockchain industry.
Synthetix is the name of a decentralized, synthetic-asset exchange. “Synthetics,” on the other hand, are financial instruments that simulate other instruments. They play a big role in the world of traditional finance. And this is what the company, Synthetix, aims to bring to the world of decentralized finance (DeFi)
But, before we dig into the role that Synthetix plays in the DeFi space, let’s look at the traditional role that synthetics have always played. We’ll start with derivatives.
A derivative is a security that derives its value from an underlying asset (or group of assets). Futures, swaps, and options are all examples of derivatives. The derivative holds no value in and of itself. Its value is based on its underlying asset(s).
Underlying assets can be things like stocks, bonds, and currencies. Bitcoin could be an underlying asset. Thus Bitcoin’s intrinsic value could drive the price of a derivative.