Understanding NASDEX, a synthetic assets platform breaking through traditional finance
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Understanding NASDEX, a synthetic assets platform breaking through traditional finance
People urgently need a native crypto stock platform to balance their crypto and stock investment portfolios.
Navigating Web3 tides with focused insights"There is an urgent need for a native crypto stock platform to balance cryptocurrency and stock investment portfolios."
Not long ago, when asked why they invested in NASDEX, a partner at Plutus VC gave this explanation.
In recent years, alongside the rapid development of cryptocurrencies, more and more traditional companies and institutions outside the crypto space—such as Tesla and Grayscale—have entered the market, triggering wave after wave of surges.
At the same time, demand for fiat on-ramps has gradually increased, prompting the entry of international giants such as PayPal.
But that’s not enough. As pathways from fiat to cryptocurrency become richer and more accessible, users are beginning to demand new use cases for cryptocurrencies.
For example, using cryptocurrencies to buy stocks.
On this front, Mirror Protocol previously achieved this. However, for most cryptocurrency holders, Mirror Protocol primarily enabled access to U.S. stocks, leaving out investors who wish to trade stocks in other markets.
It is precisely for this reason that NASDEX was born.
According to official information, NASDEX is the first decentralized stock exchange focused on the Asian market, enabling on-chain trading of Asian stocks. It allows stock investors to buy and sell various stocks anytime, anywhere, while also enjoying DeFi features such as liquidity mining and staking, significantly increasing their income beyond mere stock exposure.
NASDEX addresses current pain points for certain users and has received developer grants from Polygon due to the new liquidity and asset diversity it can bring to the Polygon ecosystem.
Previously, NASDEX raised $1.35 million in its private sale round, oversubscribed by 16 times.
Generally, if users want to purchase stocks from different markets such as Nasdaq, Hang Seng Index, or DAX30, they must undergo KYC processes in different countries and open separate accounts.
With NASDEX, users only need to connect their wallet to manage all their positions—including both stocks and cryptocurrencies—on a single crypto-native platform.
How does NASDEX make this possible?
NASDEX achieves this by creating synthetic tokens representing commonly traded stocks available on the market.
Through these synthetic tokens, users can trade instantly on cryptocurrency exchanges. Moreover, tokenized stocks on NASDEX have a fractional nature, offering greater liquidity compared to traditional stock purchases where one typically buys whole shares—or even starts with minimums like 100 shares. This lowers participation barriers and makes trading simpler and smoother.
At the same time, NASDEX allows users to stake their tokenized stock holdings in the platform's liquidity mining pools.
As a result, users can benefit not only from stock price appreciation but also from much higher returns generated through liquidity mining. Even if asset prices decline—and even without considering whether the generous mining rewards could fully offset losses—users can use DeFi liquidity mining to cushion the impact of falling asset values.
For example, when a user deposits two equal-value assets A and B into a liquidity pool, if the value of asset A drops while B remains unchanged, the user incurs an impermanent loss proportional to the drop.
What is impermanent loss?
Simply put, impermanent loss occurs when the price of a held token changes relative to the price at which it was deposited into the pool. The greater the price difference, the larger the impermanent loss.
When the price of asset A drops 50% relative to asset B, the user bears an impermanent loss of 5.72%; when the price drops 75%, the impermanent loss reaches 20%.
Generally speaking, impermanent loss is unavoidable in liquidity mining products, but there are strategies to help users minimize its impact.
One such approach is NASDEX’s tokenized stock model.
By providing liquidity with tokenized stocks, users can hold a long position in the stock with only 50% of their capital. Compared to holding a full 100% position, this method significantly reduces volatility exposure.
To achieve these capabilities, NASDEX employs a technical framework integrating three layers: oracle, smart contracts, and application.
Synthetic assets are pegged to real-world asset values via oracle protocols. Driven by natural arbitrage behavior from users, NASDEX’s smart contracts automatically execute minting, burning, and collateralization actions to maintain price equilibrium and facilitate liquidation. In this way, tokenized assets can be traded just like in traditional stock markets.
Notably, to offer enhanced incentive mechanisms, NASDEX has developed a unique NSDX token staking contract.
All value accrual on the platform is channeled to the NSDX token.
For instance, NSDX holders will share in NASDEX’s platform revenues through mechanisms such as "buy-and-distribute," "buy-and-burn," or "direct profit sharing"—with specific models decided by community voting via DAO. Secondly, NSDX will serve as collateral for minting new tokenized stocks in the future. Finally, NSDX holders will be able to propose and vote on new tokenized stocks and other platform upgrades.
As of now, NASDEX has not yet officially launched. According to the team, it plans to go live in Q1 2022. At launch, in addition to its existing suite of features, NASDEX will initiate a blockchain infrastructure expansion plan and further refine its financial model.
Currently, the traditional financial market is becoming increasingly competitive, while the cryptocurrency market faces innovation bottlenecks. Synthetic assets remain in the early stages of industry development, offering vast potential—but risks still exist.
For example, BitShares once allowed users to mint various on-chain synthetic assets including USD through collateral, but later suffered from a bear market and collapsing asset prices, leading to cascading liquidations and ultimately economic system failure. Later, Synthetix learned from this lesson by increasing collateral ratios to reduce liquidation risk. Mirror Protocol used the stablecoin UST as its minting base currency, required a 200% collateral ratio, and leveraged oracles to track real-world assets for liquidation purposes...
How will NASDEX manage liquidation risks in the future? How will it select high-quality on-chain synthetic assets? What innovations and advantages will it offer over previous synthetic asset platforms? We will continue to monitor.
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