When DeFi experienced its first major boom, the crypto market wanted more than just token exchanges and yield farming. A new idea emerged: what if blockchain could be used to trade not only cryptocurrencies, but also gold, stocks, fiat currencies, or oil?
This is how synthetic crypto assets appeared — digital instruments that are not actual Apple shares, gold bars, or dollars in a bank account, but can replicate their prices.
What are synthetic assets
A synthetic crypto asset is essentially a “digital mirror” of another asset. It does not grant ownership rights to the underlying asset itself, but reflects its market value.
For example, if a synthetic token is pegged to gold, its price should move in line with gold. If it tracks the dollar, its price should aim to stay around $1. If it mirrors the Nasdaq index, its value should move with it.
Through synthetic crypto assets, investors and traders can gain access to almost any financial market or instrument, including:
- Company stocks — such as Apple, Tesla, Microsoft, or Amazon. Synthetic crypto assets allow users to profit from the rise or fall of stock prices without purchasing the actual securities through a broker.
- Bonds — government and corporate debt securities that typically provide fixed income.
- Fiat currencies — the US dollar, euro, British pound, Japanese yen, and other currencies.
- Precious metals — gold, silver, platinum, and palladium. This allows investors to gain exposure to metal prices without purchasing physical bullion.
- Commodities — oil, natural gas, grain, sugar, coffee, and other global commodity market products.
- Stock indices — such as the S&P 500, Nasdaq, or Dow Jones, which reflect the performance of entire economic sectors or groups of major companies.
- Cryptocurrencies and other digital assets — Bitcoin, Ethereum, and various tokens, including instruments designed for both long and short positions.
- Short positions (bets on an asset’s price decline) — synthetic crypto assets allow traders to profit even when markets fall.
- Index crypto assets — special tokens that track the value of multiple assets or an entire sector, such as cryptocurrency exchange tokens.
- Derivative financial instruments — futures, perpetual contracts, options, and other derivatives used for speculation, risk hedging, and arbitrage.
The core idea behind synthetic assets is simple: the investor trades not the asset itself, but a replica of its price.
How synthetic crypto assets work
For a synthetic asset to “know” the current price of gold, the dollar, or a stock, it requires data from the outside world. This information is supplied by oracles — services that deliver market prices to the blockchain.
Next come smart contracts. They automatically issue assets, define settlement rules, monitor collateral, and execute operations without the need for brokers or exchange intermediaries.
By their nature, synthetic assets are derivatives* — financial instruments whose value is derived from another asset. This category also includes futures*, perpetual contracts*, options*, swaps*, and CFDs*.
* Derivatives — financial instruments whose value depends on the price of another asset. For example, a derivative can be linked to gold, stocks, oil, currencies, or cryptocurrencies.
* Futures — contracts in which parties agree to buy or sell an asset in the future at a predetermined price. For example, a trader can lock in the future price of Bitcoin or oil regardless of later market changes.
* Perpetual contracts — a type of futures contract without an expiration date. Traders can hold such positions indefinitely as long as sufficient collateral is maintained.
* Options — contracts granting the right, but not the obligation, to buy or sell an asset at a specific price in the future. The investor decides whether to exercise this right or отказаться from the trade.
* Swaps — financial agreements in which parties exchange cash flows, interest rates, currencies, or other assets under predetermined conditions.
* CFDs (contracts for difference) — instruments that allow traders to profit from price movements without purchasing the underlying asset. Profit or loss depends solely on the difference between the opening and closing prices.
Futures and perpetual contracts eventually became the most common form of synthetic crypto assets.
How synthetic crypto assets differ from tokenized assets
At first glance, synthetic and tokenized assets may look similar: both exist on the blockchain and can be connected to real-world markets. However, the difference between them is fundamental.
A tokenized asset is usually backed by a real asset. If tokenized stocks are issued, real shares should exist somewhere in reserve. If tokenized bonds are issued, the corresponding bonds should be held in reserve. If the asset represents tokenized gold, the company must store an equivalent amount of physical gold in vaults or bank reserves.
A synthetic asset makes no such promise. It is not a digital version of a real stock or gold bar. It merely replicates the price. Its collateral may consist of cryptocurrencies, collateral tokens, or other mechanisms.
For example, the Synthetix project uses the SNX token as collateral to issue synthetic assets known as sAssets.
Simply put: a tokenized asset is a “digital wrapper” of a real asset, while a synthetic asset is its price twin.
Why synthetic crypto assets are needed
The main purpose of synthetic crypto assets is to provide access to traditional markets without traditional financial infrastructure.
To buy real stocks, gold, or derivatives, investors usually need a broker, exchange, custodian, clearing* system, trading hours, and a whole chain of intermediaries. In DeFi, this structure is being replaced almost entirely by smart contracts.
* Clearing — a system for verifying, recording, and settling transactions between market participants. Clearing determines who owes what to whom after a trade is executed and ensures that obligations are fulfilled.
Synthetic crypto assets allow users to trade directly through blockchain networks — without stock exchange schedules, weekends, or the need to physically own the asset.
This gives synthetic crypto assets several major advantages:
- Access to traditional assets without directly purchasing them. Investors can gain exposure to gold, stocks, currencies, or indices without buying the actual underlying asset. For example, there is no need to purchase physical gold, open a brokerage account, or store securities with a custodian.
- Fewer intermediaries. Trading synthetic assets does not require brokers, banks, custodians, or traditional exchanges. Operations are executed through blockchain protocols and smart contracts.
- 24/7 trading. Unlike stock exchanges that operate on fixed schedules, blockchain protocols are available 24 hours a day, 7 days a week. This allows users to react to market events at any time.
- Access to multiple markets from a single wallet. Through synthetic crypto assets, users can trade not only cryptocurrencies but also stocks, gold, oil, fiat currencies, indices, and other instruments without switching between different platforms.
- Risk hedging. Synthetic assets can be used to protect against unfavorable price movements. For example, if an investor holds Bitcoin, they can open a synthetic short position to partially offset losses during market declines.
- Ability to profit from falling markets. Some synthetic instruments allow traders to open short positions — betting on price declines rather than price growth.
- More flexible portfolio diversification. Investors can allocate capital across various asset classes: cryptocurrencies, stocks, commodities, currencies, and indices. This helps reduce dependence on a single market.
- Arbitrage opportunities. If the same asset trades at different prices across different platforms, traders can exploit these differences for profit.
- Lower storage and maintenance costs. For example, synthetic gold does not require paying for physical storage, insurance, or specialized vault services.
- Fast access to complex financial instruments. Synthetic crypto assets simplify access to derivatives, indices, and other instruments that are often only available through brokers or professional platforms in traditional markets.
- Global accessibility. All that is required is a crypto wallet and internet access. This is especially important for users in countries with limited access to traditional financial markets.
- Automated settlements. Smart contracts execute transaction terms independently, manage collateral, and process settlements without manual intermediary involvement.
The downside of synthetic crypto assets
Synthetic crypto assets may seem convenient, but significant risks lie behind this convenience.
The first risk involves smart contracts. If vulnerabilities exist in their code, protocols can be hacked and user funds stolen. In DeFi, this is not just a theory — it is a recurring issue.
The second risk involves oracles. A synthetic crypto asset depends entirely on how accurately the oracle delivers price data. If the information is incorrect or delayed, traders may suffer losses.
The third risk is depegging. A synthetic crypto asset may stop accurately tracking the price of the underlying instrument, especially if its collateral consists of volatile cryptocurrencies.
The fourth risk is regulation. Synthetic crypto assets closely resemble traditional financial markets and may therefore attract regulatory scrutiny.
Examples of synthetic crypto assets
Ethena USDe
USDe by Ethena is one of the most prominent synthetic crypto assets on the market and one of the largest stablecoins.
Its uniqueness lies in the fact that it is not backed by traditional reserves in the usual sense. Instead, Ethena uses a delta-neutral hedging strategy.
As of May 2026, USDe’s market capitalization exceeds $4.3 billion. However, since its launch in 2023, this figure has declined by nearly a quarter.
One reason for USDe’s popularity is the ability to earn yield by holding the token. Additionally, USDe is often viewed as a more decentralized alternative to USDT and USDC.
sUSD
sUSD is one of the first synthetic stablecoins, launched by the Synthetix platform.
It was among the pioneers of the sector, but never became a mass-market success. As of May 2026, its market capitalization is around $20.8 million — roughly 200 times smaller than USDe's.
At its peak in 2021, sUSD’s capitalization reached $313 million, but later declined more than 15-fold. The reasons included declining interest in synthetic crypto assets and stability issues with the sUSD peg.
In October 2025, sUSD permanently lost its peg to the dollar. By May 2026, its price is approximately $0.63 — about 37% below $1.
sXAU
sXAU is a synthetic asset issued by Synthetix that tracks the price of gold.
It is not backed by physical gold. It is neither a token representing a gold bar nor a legal claim to ownership of one. It is simply a way to gain price exposure to gold through blockchain infrastructure.
Like many other Synthetix synthetic crypto assets, sXAU failed to become a mainstream product. Together with sUSD, its history demonstrates that synthetic assets may be convenient, but are far from risk-free.
Synthetix also launched several other synthetic crypto assets, each linked to a specific market or financial instrument:
- sETH — a synthetic crypto asset mirroring the value of Ethereum.
- sAAPL — a synthetic crypto asset tracking Apple stock prices.
- iBTC — an inverse synthetic asset linked to Bitcoin. This instrument was designed to reflect short positions (bets on Bitcoin price declines). When BTC prices fell, the value of iBTC increased.
- sCEX — a synthetic index of crypto exchange tokens. This asset reflected the value of a basket of tokens from major centralized cryptocurrency exchanges. The index included assets such as: BNB — the Binance exchange token; LEO — the Bitfinex exchange token; OKB — the OKX cryptocurrency exchange token; HT (Huobi Token) — the Huobi exchange token and others.
Such an index allowed investors to bet on the entire cryptocurrency exchange sector rather than on a single company or token.
Many of these products also failed the test of the market. However, the idea of synthetic crypto assets itself has not disappeared. The crypto industry continues to search for ways to connect traditional finance and blockchain — and synthetic crypto assets remain among the most interesting experiments on this path.