The oil industry has had a chaotic two years. Crude oil prices were down early in the COVID-19 pandemic; nevertheless, the price has now topped $100 per barrel. Moreover, the worldwide benchmark, Brent crude oil, is currently trading above $111 per barrel. There has been a considerable rise in gas prices worldwide because of the rise in oil prices.
If prices continue to rise, as many economists predict, it would stifle economic development, induce decreased consumption, and, in some situations, spark political instability. The increasing gasoline costs have already sparked fatal riots in nations such as Kazakhstan, Iran, and Zimbabwe.
And, the significant factors for this have been the rebound in fuel consumption since the height of the coronavirus outbreak and supply difficulties in the aftermath of Russia’s invasion of Ukraine. Even analysts at JP Morgan Chase & Co and Bank of America have predicted that the Russian disruption will send oil prices up to $185 per barrel.
Reasons for Rising Fuel Prices
Oil has had a history of more significant fluctuations in price than any other asset. The Organization of Petroleum Exporting Countries, or OPEC, is the primary driver of oil price changes. Second is the supply and demand rules. Prices fall when supply exceeds demand, and vice versa when demand exceeds supply.
The current instability is because of Russia’s conflict in Ukraine, which has caused crude oil prices to climb over $100 a barrel. Further, crude oil prices have risen rapidly over the recent weeks as the US and its western allies implemented severe sanctions on Russia. As a result of this, citizens’ lives are affected due to fuel prices’ direct impact on increasing inflation. Even the cost of other essential products has increased drastically, leaving people devastated.
Making the Most of Rising Panic
Rising fuel costs are putting economies under a lot of pressure. Many are worried about how it will affect the cost of other essentials rather than focusing on how to benefit from the situation. Some solutions can aid in these situations, and specific DeFi projects, such as Duet Protocol, offer them a unique approach called synthetic asset collateralization. Users have to provide liquidity to the protocol, which will be utilized to generate synthetic assets.
For example, a user can provide liquidity and choose to mint dWTI, a synthetic asset whose price is pegged to WTI crude oil. And with this asset, users can earn rewards and other utilities within Duet’s ecosystem. Moreover, the platform allows users to mint synthetic assets like Oil futures, stocks, commodities, ETFs, Indexes, and Real-estate by providing capital to its reserve.
These assets, represented as dAssets, can be traded in swaps (DEX), staked to earn rewards, or held in wallets to gain exposure. And, the benefits of holding them instead of their physical equivalents is that they provide greater liquidity, high-speed transactions, easy accessibility, transparency and low transaction fees.
Minting Synthetic Assets on Duet Protocol
Duet’s Synthetic assets are divided into two categories, stablecoin and dAssets(synthetic assets including but not limited to synthetic index, synthetic commodities, synthetic real estates, synthetic inverse asset, synthetic leverage asset, etc). Currently, dUSD, dWTI and dXAU are the only dAssets supported with more of them coming soon.
The process of minting these assets includes users providing collateral. Duet accepts more than a dozen high-quality assets such as wBTC, ETH, USDT, DAI, LTC, etc. as collateral. Interestingly, Duet Protocol accepts assets unique in the DeFi world as collateral. It includes LP tokens in large swap protocols and deposit certificate tokens in the credible lending protocols to enhance the efficiency of users’ funds and the composability of protocols.
While minting Synthetic assets is just one part of the protocol, the platform will also facilitate the listing of creative synthetic assets, such as synthetic stablecoins that track the inflationary level and NFTs. Anyone will be able to list these assets permissionless with the help of oracle providers like Chainlink, Band or Uniswap. This makes Duet Protocol the infrastructure for collateral treasury, satisfying liquidation demands while also assisting with regulatory compliance.
In addition, Duet will create a unique market-making mechanism using synthetic assets with high liquidity and trade volume. This eliminates the need to incentivize liquidity providers with tokens and allows for arbitrage between TradFi and DeFi to sustain the protocol’s liquidity. And, as a result, all “buying orders” on-chain will be dealt directly.
Volatility Is All That Matters
The best investments are made during volatile times. Economic conditions keep fluctuating for various reasons, and one should take advantage of these opportunities. The current state of rising fuel prices may be an ideal time to invest in some assets. And, synthetic assets from Duet Protocol, may be worth considering, given its rewarding mechanism. The current war scenario and interest rate hikes may last for a long time, but it is up to people to seek out and grab opportunities.