Tokens & Assets
Synthetic Asset
Derivative token tracking a reference price without owning the underlying
Definition
A synthetic asset is a derivative token designed to track an underlying price without granting ownership or a direct claim on the underlying asset. The reference can be a cryptocurrency, currency or commodity; collateral, oracle updates and settlement rules determine whether tracking holds.
Example
A hypothetical synthetic ETH token tracks an oracle price of $2,000. Holding 0.5 token gives $1,000 of reference exposure, not ownership of 0.5 ETH; a market discount can reduce what a sale actually returns.
Risks to Consider
- Oracle manipulation
- Collateral liquidation
- Tracking errors
Common Questions
Does a synthetic asset own the underlying?
No. It supplies derivative exposure under its collateral and settlement rules. Do not assume historical synthetic stock examples are currently available products.
