Financial intermediation can be classified as Real Economy (as opposed to Financial Economy) if it is directly linked to a Real Economy Asset or Activity. This means that the intermediation is aimed at directly supporting the production of goods and services instead of focusing primarily on buying and selling in the financial markets.
Through Horizon Protocol, a financial investor can stake ownership in emerging crypto commodities, derivatives, and physical assets. These assets are uniquely those historically limited to the majority of prospects due to regulatory limitations, cost, and geographical restrictions.
What are synthetic assets?
Synthetic assets usually focus on solving problems surrounding real-world asset classes in transparency, documentation, divisibility, processing of transactions, and globalization of traditional financial assets.
The assets are issued to investors after thorough verification through the blockchain. Inherently, the blockchain stores a record of these synthetic assets and catalogs each via tokenization; here, the asset is represented as a digital certificate/token and issued to an investor. As a result, traditional financial markets will unlock a diverse array of investment potential by creating fractional ownership of stocks, real estate, commodities, and precious metal.
How can Horizon Protocol facilitate the trading of real-world derivative products?
An important aspect of investments is liquidity. Asset finance platforms will have liquidity as long they provide practical solutions and appeal to the needs of investors. Tokenizing real-world assets increases the decentralization component of digital assets.
Therefore, bringing in more people into the blockchain and unlocking liquidity of assets. Besides, finance is democratized, and any interested party gets to have a share of ownership when investing for the future. Horizon Protocol facilitates transactions through smart contracts, which enhance real-time liquidity and immediate payments.
Horizon Protocol was forked from the Synthetic Liquidity Protocol and aimed to introduce scalability and interoperability to a fresh set of tradeable tangible world assets by pegging them into the DeFi ecosystem.
Horizon Exchange is a one-stop-shop for accessing digital fractions of diverse tradable assets by deploying seamless trading capabilities. Horizon Protocol functions using HZN as collateral to begin trading synthetic assets. The collateral is the foundation that allows users to trade a blend of assets, seamlessly transitioning between tangible world assets and crypto assets, going from synthetic Amazon stock to synthetic oil and back to crypto.
An added advantage of joining the exchange is the prevention mechanism for trades and infinite liquidity slippage. In the future, Horizon Protocol will build a suite of trading tools and expand the full capabilities of traditional decentralized exchanges. These tools range from stop losses, limit orders, functional live charts, and trade histories.
HZN-backed Synthetic Assets
Horizon Protocol’s primary focus is not aimed at providing cross-chain crypto derivatives. The main goal is extending the value of traditional financial markets, ranging from equities, commodities, market indices, corporate assets, and physical assets. Price data for these assets will be backed to the Phoenix Oracle to provide price feeds. Besides, the protocol could expound the oracle providers and consider Band Protocol and Chainlink.
Horizon Protocol provides exposure to real-world assets risk/return profiles via smart contracts on the blockchain, thus democratizing finance by facilitating on-chain trading of synthetic assets representing the real economy. Regardless of their geographical location or financial advantage, anyone can purchase a fraction of any asset and hold positions for future returns. Horizon Exchange will enhance the accessibility of these assets, and investors will strategize positions by taking advantage of the inbuilt oracle for price data.