Cryptocurrency company Synthetix announced on Monday that it has launched a ‘synthetic’ bitcoin on the ethereum blockchain.
The new coin will allow users to trade bitcoin-based currency pairs on the Synthetix exchange.
“Ethereum still doesn’t have a programmable synthetic Bitcoin as an ERC20 token without major liquidity restrictions or custodial risk, so sBTC is providing real utility,” said Synthetix CEO Kain Warwick. “It’s an example of the benefits of the flexibility of a distributed collateral pool of cryptoassets, which will allow us to continue to offer new trading possibilities not offered anywhere else.”
Synthetix, which has also created synthetic fiat currencies and commodities, says that its synthetic coins allow for better liquidity.
The company also claims that its synthetic coins allow users to trade in particular cryptocurrencies, fiat currencies, and commodities without actually owning the underlying asset.
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For instance, a synthetic bitcoin allows a user to trade in bitcoins without opening a bitcoin wallet or holding a ‘real’ bitcoin.
Synthetix says that this removes some of the risks associated with holding certain cryptocurrencies and that it means trades do not require counterparties.
Of course, they almost certainly do require a counterparty. It’s just that, like many contracts for difference (CFD) brokers, Sythentix will probably be the counterparty.
If that is the case, it would be interesting to know what risk management systems that the company has in place. Given the numerous problems that CFD providers have had when b-booking all of their trades, Synthetix may want to be careful about not being the counterparty to all of its traders.
In the meanwhile, the firm is steaming ahead with plans to launch other synthetic products. The firm has said that alongside the various crypto and fiat currencies it has on offer, it will also be providing access to equities and derivatives products.