FTSE has been tokenized, as has Japan’s Nikkei. Both are ERC20 tokens, acting similar to bitcoin or eth, but they track the price of the British stock market or Japan’s.
They’re a derivative, the price is set at the London Stock Exchange or other exchanges with sFTSE just tracking it through an oracle.
Yet the derivative is a token that you can hold and put it in a wallet. Instead of just a number, it is actually a thing itself through a complicated system on a new dapp called Synthetix.
Synthetix is basically dai but with SNX (synthetix tokens) instead of eth, although they’re trialing eth collateralization as well.
Here 750% collateral is recommended and if you get below 200% you get liquidated with it all subject to change as they’re going dao, so token holders can vote on all these rules and maybe new ones too.
You basically put the SNX in there, and you get sUSD. But instead of stopping there, you can now create markets, here called synths.
These markets are backed by the collateral so if sFTSE rises, the SNX stakers lose money, but there’s iFTSE as well. That’s shorting it. So whether the SNXers make or lose money depends on whether more are betting against or in line with the market.
Tokenizing FTSE in a kind of scanning a paper and putting it online way, is one thing. Creating a whole new index, and a very useful one, is something else.
That’s because instead of buying all these tokens, you just get one, sDEFI, but you miss on ‘dividents’ like free CRVs and YFIs.
You’ll notice neither is on this index, with BAL’s wight moreover a bit too low, REP maybe shouldn’t be there at all, Comp is maybe just a little bit too high, and who is UMA?
But these are small things that presumably can be changed and since we’re in the free space you can always have defi classic.
They planning to add futures now, soonish, so brining in margins. Also limit orders, with this sort of becoming a stock market of sorts, our stock market.
SEC can’t play here because code is speech and also because the Synthetix Foundation has been ‘decommissioned’ now so even if they go after some coder, it would achieve nothing as no one can do anything to the contract unless token holders agree.
Making it effectively like bitcoin really or eth but for crypto derivatives, derivatives that you can hold in a token form and move with the token being ownership.
Making them a bit different from traditional derivatives because you can store them on a raspberry pi for your kids until they turn 18 or you can take them with you to Mars if you’re Mr Musky.