Synthetic assets are different DeFi platform tokens that digitally represent real-life derivatives like futures and options.
They are created via smart contracts on a distributed and globally accessible blockchain network.
Horizon Protocol
Horizon Protocol is a DeFi platform for creating on-chain synthetic assets (zAssets) based on real-life financial assets. The protocol is a fork from the liquidity derivatives protocol, Synthetix.
Therefore, instead of reinventing the wheel, Horizon improves the interoperability, scalability, speed, and affordability of on-chain derivatives trading.
It introduces the trade of more derivative products on blockchains than the existing synthetic assets-based DeFi protocols.
Horizon Protocol and other DeFi platforms
Horizon Protocol is an improvement on the established DeFi synthetic asset-trading platform. First, it forks from Synthetix, thereby advancing on this existent liquidity derivative protocol.
Second, it seeks to expand the current asset range with more options from the traditional finance market and NFTs from the crypto market through the partnership with Phoenix Oracles.
In the future, it will expand the number of trading tools. It even aims to expand the trading options. Moreover, it is optimized with the Binance Smart Chain.
Creation of zAssets at Horizon Exchange
The utility token for the Horizon Protocol platform is HZN. It serves as the collateral for the trading of synthetic assets (zAssets). HZN holders receive incentives to stake in Horizon Protocol from transaction fees on Horizon Exchange being redirected to the reward pool for HZN stakers and the Horizon Protocol inflation policy that was designed to stimulate growth in the early stages of development.
On Horizon Exchange, zAssets are assigned a value based on the real-world asset’s price received by an oracle. Horizon protocol uses Phoenix Oracle, Chainlink and Band that links real-world financial and crypto assets with Horizon Exchange.
HZN holders provide collateral at a predefined collateralization ratio of 800% to safeguard against market volatility. Fluctuation in the HZN price will require the benefactor to reset their collateralization ratio by burning or creating more zAssets to reclaim their HZN. This collateralization ratio is subject to change based on community governance and further testing.
Which synthetic assets will trade on Horizon Exchange?
Horizon Exchange will offer trading tools like limit orders and stop losses. It will expand its functioning to options, leverage, and margin trading.
The tradable zAssets on the Horizon Exchange include:
Equities
Shareholders hold the equity in a company. It is the value of the company’s total assets after deducting the total liabilities.
Commodities
These refer to the tradable raw products. Hard commodities include mostly natural resources like oil, while soft commodities refer to agricultural or livestock products like coffee.
Market Indices
Derivatives can be based on market indices like S&P 500. The value of such futures or options varies with the value of the underlying stock index.
Corporate assets
These refer to the financial assets of a business. Vehicles, equipment, and property are examples of corporate assets.
Physical assets
These are tangible assets of commercial and financial value. Equipment fitted in an apartment building, such as a fire fighting system, are physical assets.
Crypto assets
Short, long, and unique crypto assets from various blockchains can unite on the Binance Smart Chain via Horizon Protocol. Some unique versions slated to be in Horizon Protocol’s synthetic asset range are NFTs and fractionalized NFTs.
In the future, the Horizon Protocol DAO will vote for assets they wish to see.
Conclusion
Synthetic asset-based trading without an intermediary is a tremendous achievement for DeFi.
You can digitally trade in a highly secure environment based on asset price fluctuations in the global finance market. Horizon Exchange offers the ability to trade a host of synthetic assets ranging from real-world economy assets to synthetic crypto assets on the same platform.
You can learn more about Horizon Protocol on Twitter and Telegram here.
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