Decentralized finance is known for its blockchain-based financial services that mirror traditional finance, creating new services or derivatives stemming from blockchain's unique features. As the growth of the technology increases, the experimentation and innovation in the space, including offerings of decentralized versions of mainstream financial products become what many industries are investing in, for them to be more relevant in the market of today.
What are the key features DeFi offers?
As far as DeFi is concerned, an open and transparent financial system is the goal and aims to offer novel financial products while leveraging the key elements and functions of blockchain.
The DeFi development has emerging sectors in;
- Stablecoins
- Decentralized Exchanges & Marketplace
- Lending and Borrowing
- Insurance and Payments
- Custodial Systems and Many More
When you carry out a bit of research about blockchain that has almost all the above-stated emerging sectors, mentioning Cosmos is not by accident because it has amazing projects which unique solutions in the space.
Let's dive in to learn about some of the projects
If you are new to Cosmos Network, you must have missed some major events, but not to worry, you are still early as some amazing projects are set to launch their outstanding solution to that major problem in our real-life engagement. As the internet of blockchain, Cosmos Network hub shares security with other blockchains which lends its capital to be used to block validating on smaller chains and when building a solution, it's important to look into the security aspect of the solution. It is interesting to know that every project/solution on Cosmos Network contributes to the security of the entire ecosystem and thereby makes the network so secure.
COMDEX On Cosmos Network
Comdex is a DeFi infrastructure layer of the Cosmos ecosystem and at the time of writing this article, two projects are on under testing on its chain.
Let's talk about the lending and borrowing protocol built on Comdex Chain
Commodo
Commodo is an IBC-Native collateralized lending & borrowing platform built on Comdex Chain and as far as lending/borrowing platforms and protocols are concerned there are various benefits for market participants:
For Borrowers, let's us look at it from two angles,
- Borrow a utility: The borrower may decide to temporarily borrow a token to earn certain rights or power on the blockchain, like governance rights.
- Ability to short an asset: A borrower can buy an asset and instantly trade it on any other exchange for any other crypto coin, this thereby shorting the asset. This replicates margin trading in centralized exchanges and also offers margin trading functionality on platforms that do not support it.
For Lenders, a lot of benefits:
- Long-term Investment Reward: A long-term investor can receive additional profit on lent assets aside capital
appreciation. - Earning opportunity from Stablecoins: Stablecoin issuers can have the chance to win incentives by distributing part of their revenue from floating interest rates collected on their bank deposits to everyone that support the circulating supply through these decentralized applications.
Let me stop here, let's look into what Commodo set to offer
Commodo team look into the problem in the current lending borrowing markets and design a solution to solve the problem.
One of the problems is a limited amount of single borrowable assets due to an adoption of a pooled lending model, where lenders’ assets are pooled for borrowers to borrow at an interest rate.
Commodo is designed to have isolated money markets called cPools which will serve as highly liquid assets of the Cosmos ecosystem In the future, money markets for interchain assets from Ethereum and other ecosystems are certain.
As a lender on Commodo, you can lend Cosmos ecosystem assets to earn yields, but as a borrower, you can borrow with overcollateralized loans, paying a dynamic interest rate that depends on the platform’s supply and demand of assets.
Basic Things To Know About Commodo
- It has isolated money called cPools
- Each of cPools consists of two assets (cPool and transit assets)
- On the platform, users can deposit any of the 2 assets as collateral to borrow.
- $ATOM & $CMST are the two transit assets on Commodo
- Interest rate is dynamic, it is a determinant of the supply and demand of the assets
- User can be liquidated when collateral does not sufficiently cover the outstanding loans
- Auctions follow a Dutch auction model with instant settlements
In conclusion, decentralized finance leverage blockchain in its operations to solve a major pain point allowing users to not only access funds but do so in a transparent manner this solution is going to help the under-banked, de-banked or completely unbanked. As Commodo is yet to be launched, you can check out the testnet platform and study the operation closely.
Commodo Testnet: https://testnet.commodo.one
Guide about the testnet: https://blog.comdex.one/how-to-use-commodo-platform-walkthrough-841865dd4c8b
Learn More About Comdex: https://comdex.one/