Synthetic asset A financial instrument that simulates other tools. UGA, a decentralized financial contract platform focused on cryptographic composite assets, today announced its withdrawal from the Synthetic Token Builder. Users can create their own tokens to track any price (Standard & Poor's 500 Index, Gold Price, French Dollar Price, the number of Twitter/IG fans owned by someone, the number of points you have earned…). For example, if a user creates a synthetic token of the Standard & Poor's 500 Index, it can indirectly participate in US index trading in this form, and can even do more or short. The tool is currently running on the Rinkeby test network.
How to create a synthetic token?
First you need to make sure that you are using the Rinkeby test network and have the test network ETH and the test network DAI. If you haven't already, you can get some by clicking on the UMA Synthetic Token Builder .
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The running process of the token building tool?
A token construction tool with good mortgages
Dapp creates a token facility by launching a smart contract. After depositing the stable currency DAI into the token building tool, you can issue a synthetic token that is 100% collateralized by the DAI you deposited. Token Facility's over-collateralization (total collateral greater than or equal to the required collateral) ensures that synthetic tokens are always 100% supported. This helps to guarantee to anyone who buys synthetic tokens that the tokens in their hands are fully mortgaged (provided by you).
Token building tools without full mortgage
At any time, anyone can ask a smart contract to check if your token building tool is in full mortgage (ie, if the total mortgage reaches the required mortgage). In the process, the smart contract checks the latest price of the token in the Price Feed relative to the DAI and checks if the DAI you are collateralizing in the contract meets the required amount. If you are satisfied, then you are fully mortgaged. If not, the smart contract will freeze all collateral in the contract (you cannot deposit or withdraw) and evaluate the fine. Holders of synthetic tokens can convert tokens into DAI proportionally, plus a penalty portion.
What do synthetic tokens do?
Here are some ideas:
1. Create a token that tracks the CNY/DAI exchange rate and use it to support wallets that focus on the Chinese market.
2. By creating tokens that track Tesla stock prices, we can use this token to short Tesla stocks (of course, we need a competitor who is willing to do long-term Dostera stocks), which can be sold on DEX. currency.
If you want to go a step further, you can modify the parameters that represent the build tool smart contract to create other types of synthetic tokens:
1. Create a token that tracks the DPI rate on the S&P 500 Index and Compound. By changing the token's margin currency from DAI to cDAI, you can get an increase in the S&P 500 index.
2. Create a token that tracks the DAI borrowing rate on the Compound to help the borrower hedge the interest rate risk.
Obviously, while encrypting synthetic assets can guarantee decentralization, it can indeed increase more open financial application scenarios and open up the encrypted world and the traditional financial world. The outlook is good, but new things may have many unknown risks. The DeFi industry itself is still in its infancy, and we still need more experimentation, waiting for the truly mature crypto-synthesis assets.