Synthetic assets, one of the most promising use cases for decentralized finance (DeFi), are emerging as an increasingly competitive landscapeTwo new projects aim to offer retailers scalability and new markets.
The Injective Protocol of the decentralized futures exchange started on Friday with the introduction of a 24/7 market for synthetic gold around the clock in its Solstice Layer 2 test network.
“It is very interesting to study gold for early commodity futures for Injective as Bitcoin and gold have quite interesting market dynamics.”Mira Uddin, director of business development for Injective, told Cointelegraph. “I think it’s natural to introduce this dynamic into the DeFi space.”
Synthetic asset markets like Injective often have a notoriously difficult liquidity problem. In order to create assets that track real price movements, a liquidity reserve must be available to accommodate these fluctuations. Injective aims to overcome these hurdles by having well-funded investors act as first-time users:
“We will first involve our investors, who are also market makers, and create strong liquidity support in all markets. We will therefore first initiate liquidity with our existing investors, ”said Uddin.
“Our upcoming liquidity mining mechanisms will continue to inspire market makers to join the platform and get the most competitive spreads,” he added.
Uddin also told Cointelegraph that Injective is following an aggressive roadmap that includes testnet updates for Q1 2021 and a full mainnet launch in Q2 2021.
Injective’s announcement follows the launch of another synthetic asset platform, Mirror Protocol, which is currently focused on US technology stocks.
Mirror requires a 150% guarantee rate to create synthetic assets like mAAPL and is based on the Cosmos blockchain.
But still, Synthetix, one of the earliest and most successful synthetic asset platforms, has a number of upgrades planned to compete with these upstart protocols.
Synthetix is one of the many DeFi giants currently planning to implement Layer 2 scaling solutions. A recent blog post explained how “virtual synthesizers” can enable greater liquidity of synthetic assets.
According to its website, Synthetix currently has a total blocked value of $ 850 million.