A synthetic asset reproduces some or all of the economic exposure to another asset, basket, or index through contractual rules. In DeFi, this exposure may be represented by a token or a derivative position whose value depends on a reference price. Holding it does not automatically confer ownership, voting rights, or delivery rights in the underlying asset.
How exposure is created
A protocol can use collateral, price oracles, and settlement rules to calculate what holders are owed. Some designs pool collateral across positions; others isolate each position. Minting, redemption, margin requirements, and liquidation determine how the instrument remains funded and how users enter or exit.
For example, a synthetic gold instrument may aim to follow gold prices while settling in cryptocurrency. Its holder does not necessarily have a claim to a specific gold bar. The contract terms define the actual entitlement.
Why tracking can diverge
Synthetic exposure can provide access to otherwise difficult markets, but the reference price is not a guaranteed trading price. Fees, funding payments, limited liquidity, oracle errors, and insufficient collateral can affect results. A token backed by custody of an actual asset and a purely synthetic instrument therefore require different checks on ownership and settlement.