Synthetic assets, one of the most promising use cases for decentralized finance (DeFi), is becoming an increasingly competitive landscape as two new projects aim to bring scalability and new markets to traders.
On Friday the injective protocol of the decentralized futures exchange began with the start of a synthetic gold market around the clock in their Solstice Layer-2 test network.
“It’s pretty interesting to study gold for the first few commodity futures on Injective because Bitcoin and gold have pretty interesting market dynamics,” Mirza Uddin, Injective’s business development director, 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, there must be a readily available pool of liquidity to accommodate those fluctuations. Injective aims to overcome these hurdles by having well-funded investors act as early adopters:
“We will first involve our investors, who are also market makers, and build strong liquidity support in all markets. So we will first increase the liquidity of 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 has an aggressive roadmap, including testnet upgrades by 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 collateralization ratio of 150% for new synthetic assets such as mAAPL and is based on the Cosmos blockchain.
However, 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 deploy Layer 2 scaling solutions. A recently published blog post outlined how “virtual synthesizers” can enable greater liquidity of synthetic assets.
According to their website, Synthetix currently has a total blocked value of $ 850 million.