Race for synthetic assets has begun – focus on scalability and liquidity
Two new platforms for synthetic assets are stimulating competition.
Synthetic assets, one of the most interesting fields of application in the field of decentralised financial services (DeFi), is slowly becoming more and more competitive. So now two new projects are about to bring scalability and a broader range of services to the market.
Accordingly, the decentralised trading platform Crypto Genius Injective Protocol introduced „synthetic“ gold on its Layer 2 test network Solstice for the first time on Friday.
„It is very exciting to test gold as the first commodity future on Injective, because Bitcoin and gold have interesting market dynamics in common,“ Mira Uddin, Injective’s Head of Business Development, told Cointelegraph. And she continues: „I think it is logical to bring this dynamic into the DeFi sector“.
Synthetic asset trading platforms such as Injective often have problems in providing sufficient liquidity. In order to offer financial products that reflect price movements of assets in the real world, a broad pool of liquidity is needed to absorb the corresponding fluctuations. Injective aims to solve this problem by first allowing investors with sufficient capital to become the first users:
„We will first bring on board investors who are market makers themselves so that they can offer high liquidity for all markets. With these investors we will then have the necessary liquidity,“ says Uddin.
„Our planned mining mechanism will provide additional incentives for market makers to join our platform and enable competitive pricing“, she added.
In addition, Uddin tells Cointelegraph that Injective is pursuing a bold timetable, with the test network upgraded in the first quarter of 2021 and the main network rolled out in the second quarter of 2021.
The announcement by Injective follows the launch of Mirror Protocol, another synthetic asset trading platform specialising in US securities
Mirror requires 150% collateralisation to „mint“ a synthetic security such as mAAPL (Apple). The project is run via Cosmos Blockchain.
However, the competition is not sleeping, because Synthetix, probably the largest platform for synthetic assets to date, has planned a series of upgrades to compete with the newcomers.
Synthetix is one of the leading DeFi projects, which also plans to deploy a layer 2 solution. In a recent blog entry, the project explains how this could create better liquidity.
According to its own website, Synthetix currently has $850 million invested in the project.