What Is the Risk of a “De-Peg” in a Synthetic Derivative Token?

A de-peg occurs when the synthetic token's market price deviates significantly from the price of its underlying real-world asset. This can be caused by oracle failure, insufficient collateral, high network congestion, or a lack of arbitrage incentives.

A sustained de-peg undermines the token's utility as a derivative and can lead to protocol insolvency.