What are synthetic assets in crypto?

Synthetic assets in crypto are tokens designed to copy the price of something else, such as the US dollar, gold or a company's shares, without the token holder owning that thing. Instead of a reserve of the real asset, the value is kept in line by collateral, price feeds and sometimes hedging trades.

How do synthetic assets work?

A synthetic asset needs two parts. The first is collateral, usually crypto locked in a smart contract and worth more than the synthetic tokens issued against it, so price swings do not leave the system short. The second is a price feed, called an oracle, which tells the contract what the tracked asset is worth.

Mirror Protocol, launched by Terraform Labs in December 2020, is a clear example. According to an SEC complaint, a user had to post collateral worth at least 150% of a stock's value to create a token such as mAAPL, which moved with Apple's share price. If the stock rose, the user had to add collateral or face liquidation. Returning the token released the collateral.

What are synths in crypto?

"Synths" is the name Synthetix gave its synthetic assets. In a 2018 overview, Synthetix described synths as onchain assets that track real world values, including currencies, gold and equity indices. Holders of its SNX token locked them in a contract to mint synths, starting with a dollar-tracking token called sUSD. Instead of matching each buyer with a seller, the system tracked each minter's share of the total outstanding debt.

Designs change over time. As of October 2026, Synthetix's documentation focuses on trading perpetual futures on Ethereum mainnet, a related form of price exposure covered in our guide to perp DEXs.

What is a synthetic dollar?

A synthetic dollar is a token aiming to stay worth $1 without being backed by bank deposits. Ethena describes its USDe this way. Its docs say volatile holdings, such as spot crypto, are paired with short futures positions of about the same size, so gains and losses largely cancel out.

That makes it a different design from a reserve-backed stablecoin and from an algorithmic stablecoin, even though all three aim for the same $1 value.

What are the risks of synthetic assets?

Holders depend on the collateral, the oracle and the contract code all working. If the collateral falls sharply or a price feed is wrong, a synthetic can drift away from the asset it tracks.

There is legal risk too. In February 2023 the SEC sued Terraform Labs and alleged that mAssets were security-based swaps offered to ordinary investors without registration. The complaint stressed that an mAAPL holder did not own any interest in Apple stock. This is the key difference from tokenized stocks, which are meant to be backed by real shares. Rules for synthetic products vary by country and change often.