What is a Synthetic Asset?. A synthetic asset tracks the price of something else—stocks, commodities, or indexes—using collateral and smart contracts.
How it works
Users mint synths by locking collateral. Oracles feed prices; protocols rebalance or liquidate to maintain pegs.
Why it matters
Synths expand on‑chain market access but add oracle and collateral risks.
Common pitfalls
- Minting with minimal collateral buffers
- Using illiquid collateral
- Ignoring peg metrics and funding costs
Quick example
You mint a synthetic gold token against stablecoin collateral to hedge without holding physical metal.
See also
- Oracle
- Collateral
- Stablecoin
TL;DR: What is a Synthetic Asset? defined in plain English with practical next steps.
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