Synthetic Assets
Synthetics are tokenized derivative assets. They are derived from real-world assets, whose prices are tracked on-chain via price feed mechanisms. Synthetic assets allow for exposure to their corresponding real-world asset without requiring that the asset itself be physically owned, permitting complete freedom and interoperability on the blockchain. 

Anything with a price can be turned into a synthetic asset on Butane, including more exotic assets such as "inverse" synthetics, which track the inverse price of a real-world asset.

Collateralized Debt Positions
All synthetics on Butane are backed by collateral. This is facilitated by opening Collateralized Debt Positions ("CDPs") - positions created when a user locks up CNT collateral and mints synthetic tokens as debt. Each synthetic on Butane has an associated set of parameters which dictate what CNTs can be used as collateral, as well as how that CNT's value is weighted in the position and the maximum percentage of debt that can be collateralised by that token. Debt accrues linearly as interest, and overcollateralization is enforced via liquidation and redemption mechanisms.

When you create a CDP with ADA, you retain staking rights to the locked ADA and can continue to earn staking rewards on Cardano's PoS mechanism.