The decentralized financial protocol Kwenta has launched a number of synthetic tokens for popular stocks, but current gas prices could make these stocks extremely expensive to trade..
In a blog post on April 23, the Derivatives Trading Protocol Kwenta – an Ethereum dApp backed by Synthetix – announced the listing of several synthetic tokens that track the share prices of the five major tech companies known by the acronym FAANG. These include Facebook, Apple, Amazon, Netflix, and Google. Tesla was available now and plans to add Microsoft (MSFT) and Coinbase (COIN) soon.
The mirror protocol on the Terra blockchain has a similar setup that offers a range of synthetic tokens based on technological actions as well as a FAANG index token.. Tokenized stocks were first available on the FTX derivatives exchange and can now be traded on other major platforms such as Binance. However, synthetic tokens allow these stocks (or something similar) to be traded on DeFi.
Synthetic digital assets are token versions of real assets such as stocks, commodities, and indices.;; They can also include physical assets such as real estate or vehicles. Their prices follow those of real assets, followed by price oraclesThis allows investors to expose themselves to them. The added attraction is that anyone can trade them anywhere without going through the legal framework associated with the US stock exchanges..
The DeFi Synthetix protocol popularized synthetic tokens that users can use to create their own synthetic assets as long as it is based on crypto security.. The just introduced synthetic tokens of the FAANGs can be used to provide liquidity in the pools provided by Balancer.
In the April 23rd issue of the DeFi newsletter “Bankless”, the founder of the UMA protocol, Hart Lambur (another synthetic asset platform) compared synthetic tokens to alchemy, adding that they allow anyone to create a financial asset for anything.
In the same way that YouTube made new forms of long video content bloom, […] synthetic assets will enable new types of financial products that we have not yet imagined. “????
There is an underlying problem, however, especially with Ethereum Layer 1-based platforms. According to Bitinfocharts The average cost of transactions using Ethereum rose to its second highest level on Tuesday April 20, reaching $ 30.
Etherscan is currently reporting three-digit gas prices in USD for more complex DeFi activities., like the token exchange on Uniswap. This could make investing in the FAANGs’ new synthetic tokens more expensive than buying the real shares and the payment of brokerage commissions.
Fortunately, Synthetix is one of a series of DeFi protocols that implement Layer 2 scaling solutions. Synthetix is currently migrating from the exchange to the rollup technology of the Ethereum scaling solution provider Optimistic Ethereum.. Due to delays in launching the main Optimism network This is unlikely to happen before July 2021.