Synthetic Assets

Exploring Maya's capabilities

There are numerous innovations in the Maya Protocol that were built to optimize efficiency, liquidity, and usability. Synthetic assets are one great example of this, and we'll explore their functionality, benefits, and limitations here.

Synthetic assets, also called "synths" and denoted sASSET or CHAIN/ASSET in the Maya notation (versus CHAIN.ASSET for native assets), are tokens that can be minted from the collateralization of a user's LP position and are designed to replicate the value and performance of the locked assets while also being tradeable and transferrable inside the Maya ecosystem.

Each synthetic asset is essentially an LP token that has been locked in place, with the system keeping track of the current value of the underlying assets. When a user mints a synthetic asset, they're not directly swapping the underlying asset for its synthetic counterpart. Instead, they're temporarily locking their LP tokens, and the system creates a new synthetic asset pegged to the locked asset's value. They enable our users to keep exposure to their assets while accessing faster and cheaper transactions within Maya.

The enhanced usability of synths increases the overall liquidity and activity within Maya because they allow for cross-chain swaps with low slippage - due to the vast liquidity against CACAO – and because they facilitate more trades in the same pool.

Synths imply that Liquidity Providers are taking a leveraged position on CACAO. This can help them earn more rewards if CACAO outperforms the asset, but it can also go the other way. The higher the percentage of synths that exist on the network relative to pool depth, the higher the leveraged position Liquidity Providers are taking. To limit this risk, the minting of synths is capped to an upper limit, fixed in the Mimir settings.

As the Maya ecosystem continues to evolve, especially with the Aztec Chain, synth assets offer a gateway to a diverse and expansive array of opportunities, and we expect to see them play an increasingly important role in the protocol's functioning and in the total amounts of swaps.

If you're interested in exploring these innovative assets or have questions about Maya, we invite you to join our official Discord server. Connect with fellow enthusiasts, stay updated on the latest developments, and gain insights from our devs and other experienced community members. See you there!