Why would someone want to use/trade synthetic assets?

My apologies if this is a really dumb question. I’m pretty lost in the general use case of many of these DEFI tools. I don’t understand what’s in it for someone to trade synthetics?

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Lets create a token together?

Just my two penny worth dude… and I’ve not studied any of the Defi courses here! But If I understand you correctly…currently we have various asset classes and systems set up like walled gardens. Inf Defi you could potentially have no walls. I see it like having access to the internet as opposed to only having access to your companies intranet

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So what would that synthetic token be used for? I know we could do it for kicks, but I don’t get the underlying reason why we’d want to make our own synthetic coin. Is it merely to track transactions in a way that doesn’t actually transfer value? I just don’t understand how these things hold value, I guess.

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I guess that’s up to us right?

Isn’t that what we’re all doing here just guessing out loud. crystal balling!! lol.

Tracking transactions would be great. I think that adds loads of value. especially certain industries. Imagine how much time could be saved?

For some. I hear theyre attracted because it’s something they can own. Outright. With nobody telling them when, where and how they can use it. Take the US dollar. Fiat is in a bank. Nice! But they set the rules. Can only withdraw x amount from an ATM… call you up if they sense your transactions are suspicious. Stuff only clears Mon-Fri. And they even get their own BANK holidays. So you dont ‘ALWAYS’ have access to your own money. That alone seems good enough for me. Having total complete access to your own cash… Send it across international borders for the same fee as down the road. The fact they lend your money out to whomever, make loads on it and then give you crumbs for an interest rate. That never seemed cool to me.

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Thanks for chiming in. I think the thing that got me really confused is when I saw synthetic versions of btc and eth. These were shown as sBTC and sEth. I just couldn’t figure out the purposes of it. Now, the only thing I know about “Synthetics” is what I saw in “The Big Short” when they give the analogy of people being able to bet on the outcome of other banks investment choices and giving bigger and bigger odds. I’m assuming that’s what this is. Just another trading instrument. But I just don’t understand where the value is in the synthetic coin. I hope I’m making sense. I may be overthinking it, but I’m still confused about the application of synthetic coins.

After a week to let my thoughts dwell on all of this, here’s how I think I’d answer my own question . . Hope it helps someone else.

Synthetics are just another tool in the financial instruments shed. Broadly speaking, the defi space is comprised of money markets, exchanges, synthetics and insurance. I suspect that the conventional banking system has these same instruments, but they are only available to a protected class of bankers.

There are some people in this world that would be happy to put their money in a money market account and earn modest interest. Others might put their money in a riskier money market account and earn higher interest.

There are other people in the world that may need to transact business whereby they need to convert a whole lot of one asset to another. So the defi space has exchanges that can tap into large pools of money
in distributed money market accounts so the price is kept stable and overall liquidity isn’t drained.

There are other people that simply see money market accounts as a way to stake their money so that it can be lent to others. . . . . . but. . . . a particular money market contact might let you borrow against that stake. So this would let you simply stake your money (still yours), but “play” with synthetic tokens that are lent against the staked amount. . Currently , people are just playing with these tokens to seek higher yield returns in other financial instruments, but eventually, this is how car loans and mortgages will happen.

And in the end, there are insurance contracts that might help you to protect your originally staked money so that you’re a little bit protected in this new and risky space. The insurance contracts will “give” you synthetic tokens and stake/hold them. In the even of a claim wherein the originally staked coins are lost, the synthetic tokens will be released as the repayment. Or, if the claim is never made within the terms dates, then the synthetics are destroyed (or are returned to the contact??).

I think the only remaining question in my mind is that I still don’t understand the overall shell game. My logical brain tells me that if someone is getting ahead financially. . . . then someone needs to be losing financially. Hopefully I’ll figure out this last part with more tinkering. If you made it this far, thanks for reading and please feel free to correct any of my bad assumptions.


Looks like Ivan came to the rescue. This article is fantastic:


This was definitely one of the lessons that went completely over my head…what are the benefits to syn. tokens if you have to provide 800% as collateral???

Thank you for posting this it really helped!