Why create Synthetic products?
Synthetic products provide users with price exposure to the underlying asset without having to own the actual underlying asset. This can provide benefits in the form of a seamless experience (e.g. you can own Bitcoins on Ethereum without having a Bitcoin wallet), increase accessibility to certain products (e.g. stocks) without having a brokerage account and is censorship resistant since it is on a decentralized platform.
Synthetic products also offer users with flexibility for customizing
the products to their needs and also allow for the creation of markets for assets that have no readymarket yet (e.g. you can create IOUs for tokens which have not started trading yet).
Market for Synthetic products
Globally, ~30% of adult population (1.7 billion) still remain unbanked (yet, two-thirds of them own a mobile phone that could help them access financial services). This high ratio of unbanked/underbanked is not only issue of underdeveloped countries. Even in the United States, the Federal Reserve estimated there are 55 million unbanked or underbanked adult Americans in 2018, which account for 22 percent of U.S. households.
Emergence and widespread of cryptocurrencies are helping these unbanked/underbanked population to have access to basic functions of finance – such as wire transfer, storing of value, payment etc. However, another important part of finance still remains uncovered – “investment”. Investment is an important activity for households to hedge inflation and generate returns over savings and income that has not been spent.
Although cryptocurrency itself is one possible investment available for these unbanked/ underbanked people, yet these people are still being excluded from much greater opportunities of traditional asset markets. Compare to today’s global crypto market cap of $360 billion, global commodity market size is over $20 trillion and equity market stands over US$70 trillion. Forex is even bigger with daily trading volume of $6.6 trillion.
Easily accessible and convenient synthetic product trading platform will grant access of these wide variety of traditional assets to a significant number of unbanked/ underbanked people. For example, a small shopkeeper in Indonesia could spend his pocket money to invest in WTI oil futures synthetics, and a delivery man in Bolivia can use small sums of money to invest in synthetic Tesla stocks. Until now, these kinds of investment have been impossible for many people, but the introduction of synthetic exchange opens door to 30% of world population and connects them to various asset markets globally.
Why is there a need for Beyond?
Beyond is designed to create the ideal synthetic product protocol for the market.
There are several attempts in the market that has tried to create synthetic products through similar mechanism, but these have critical flaws which erodes trust within the synthetic products. These includes:
• Low liquidity resulting in high slippage and large spreads
• Poor price tracking of synthetic products relative to actual underlying products
• High trading costs due to Ethereum network congestion
• Poor UI/UX when using exchange
• Limited number of assets available for synthetic trade
• Lack of expertise in underlying financial products