These are financial instruments that derive their value from underlying cryptocurrency assets. Let's explore them in more detail:

Options Contracts

An options contract gives a user the right and not the obligation to buy or sell an asset at a specified price on a specified date. It can be used to hedge against a digital asset’s price fluctuations or to trade its future price actions.

For example, if a trader owns SOL and is concerned about a potential price decline in the future, they could buy a put option that allows them to sell SOL at a set price, regardless of its spot price. By this, they limit potential losses if the SOL price falls below the set price.

On the other hand, users can also use option contracts to enjoy future price movements of crypto assets. To do this, a user can buy a call option that gives them the right to buy the asset at a set price if its price goes beyond the strike price.

Futures Contracts

Futures contracts allow investors to benefit from the future price actions of underlying assets. A futures contract essentially gives the user the power to buy or sell an underlying asset at a set price and date.

In traditional derivatives, futures contracts are typically traded on centralized exchanges like Gate.io. With decentralized derivatives, traders can access futures contracts in a trustless, permissionless environment and trade directly with one another on the blockchain without needing intermediaries.

Decentralized futures contracts can be either perpetual or have a fixed expiration date. Perpetuals are the most common types of derivative contracts and are programmed without an expiration date or settlement. Although they come with risks like high leverage and funding fees, perpetual futures contracts are designed to be flexible and accessible.

Synthetic Assets

Also called synths, synthetic assets are digital representations of assets and are designed to provide an accessible way to hold and trade them. They are primarily tokenized derivatives that use blockchain technology to replicate their underlying assets’ value. Their goal is to harness blockchain technology to allow anyone to have access to diverse assets without complexities.

Although they share similarities with stablecoins, synths are more diverse because they can represent a wide range of assets, including stocks, altcoins, futures, options, and precious metals. Furthermore, while synths attempt to represent the value of their underlying assets, they are not directly backed by them.