Synthetic/Derivative Asset Support
Part of Axial’s vision is providing synthetic/derivative asset support to the Avalanche network. However before we talk about how Axial will provide support, we first need to define what exactly synthetic and derivative assets are. Simply put, a derivative is a digital asset with a defined or limited lifespan. A synthetic asset is a derivative asset that is tokenized.
On Avalanche, derivative assets are numerous. When you supply liquidity on a decentralized exchange like Trader Joe or Pangolin, you receive a token in exchange for your deposit. This token represents your deposited funds and is coincidentally a derivative asset.
Similarly, when you interact with lending protocols, you are receiving derivative assets for your deposits. If you were to lend an asset on Benqi, Banker Joe, or Aave (all of which are lending protocols on Avalanche), then you would receive a derivative asset (a token) representing your deposited funds.
As an example, let’s say you lend out AVAX on Benqi. When you deposit your funds on Benqi, you receive a derivative token. The amount of this token you receive is dependent upon how much AVAX you deposit. Similarly, if you deposit that same AVAX on Banker Joe or Aave, you will receive a different derivative token for your deposit. The only difference between these three derivative tokens is that one token represents a deposit on Banker Joe, while one represents a deposit on Aave, and one represents a deposit on Benqi.
Axial will provide a derivative liquidity pool for these three derivative assets. In other words, you will be able to supply the same derivative AVAX asset from Banker Joe, Benqi, or Aave into a three-way liquidity pool. By doing this, anyone who owns an amount of this derivative token will be able to trade it between other kinds of the same token.
If you own the derivative AVAX token that represents your deposit in Benqi, you will be able to seamlessly trade it for the derivative AVAX token that represents a deposit in Aave. This saves you the trouble of having to withdraw all your funds back to AVAX and then redeposit them on another platform.
Furthermore, this liquidity pool on Axial will open up new strategies for participants in the Avalanche ecosystem. A new strategy that swaps between each of the three lending protocols to find the highest yield will be possible. By creating new liquidity pools for derivative assets, Axial will create innovative, new wealth generation opportunities and pave its way as the new center for liquidity on Avalanche.
About Axial
Axial is a decentralized value-pegged asset exchange with a focus on native Avalanche applications. Axial uses a model that provides ultra low fees and slippage for traders.
