Is this something new we see striding into the world of DeFi? I’m not sure right now, so let’s take a little look at today’s project from the world of blockchain, Comdex.
Comdex is part of the Cosmos ecosystem and styles itself as “A Fully Interoperable Synthetics Protocol.” Er, do what, you might reply. I know I did just that. Probably means something to some folks, but that doesn’t include me. Therefore, let’s start at the beginning, putting that description into some more easily understood language, before moving on to take a look at what Comdex does.
Comdex launched its mainnet in November 2021, joining the rapidly growing list of dApps in the Cosmos ecosystem, one of my favourites. Comdex’s overall mission is to provide all of us with access to a wide range of investment opportunities that have, until now, only been able to a few through the traditional derivatives markets. This is its mission to ‘democratise finance’.
It offers several core features.
Mint Synthetic Assets
You can mint a range of synthetic assets based on real-world assets, using prices obtained from a reputable oracle. Offering one of a number of crypto coins, such as ATOM or Comdex’s own CMDX, as collateral, you can mint a synthetic asset for a real-world asset such as gold, oil or soybeans. This allows you to gain exposure to movements in the price of each of these real-world assets, though you need to be aware that since this represents a collateralised debt position you could find it being liquidated should the price of the asset move against you sufficiently strongly.
Bridge to other chains
Since Comdex bridges to a number of other ecosystems, it also allows asset holders from these other chains to connect to Comdex and put these assets to work.
AMM for swapping
There’s also an automated market maker (AMM) that allows you to trade your minted assets for other minted assets, thereby avoiding the need to burn a synthetic asset you have created in order to move into a new one.
Trading
The exchange will also allow traders to take on long or short positions on the movement in the price of these synthetic assets, depending on whether they see the price going up or down.
Liquidity provision
It will also allow users to earn trading fees and CMDX rewards by operating as liquidity providers.
A Huge Potential Market
One of the interesting features of Comdex and one that could see it become highly successful is that the services it provides are potentially attractive not just to individuals but also to trading companies and other corporate entities with an interest in the price of real-world assets. These have the potential to bring vast volumes of business to the platform, which would generate correspondingly high levels of fees. Indeed, Comdex first started providing its services to professional traders, and the overall market here is worth trillions of dollars. The latter group could, for example, include farmers concerned about the movement in the price of wheat, any one of whom could take a position that protects the price they obtain for their growing crops when the time comes to harvest and sell it.
LBP Launch
One final point I want to mention about Comdex is its use of the Liquidity Bootstrapping Pool model for its launch. This involves the price of a token finding its own price point through the use of a reverse Dutch auction. I won’t go into detail here about how these work, but the key point is that they are seen as being a fairer way for a new token to be launched onto the market place by undermining the ability of large buyers to corner the market early on and then dump their tokens later once the price has become inflated. This model was used as part of the team’s desire to ‘democratise finance’. Extra points to them, I say.
Comdex is a really interesting project that has the potential to grow substantially. By making a wide range of synthetic assets more readily available it will open up a raft of potential investment opportunities to the many that were previously only available to the few. I think it is fair to say from this point of view that it looks like making a success of its mission to ‘bring greater democracy to the world of finance’. One to watch, I feel.
Until next time…
Renaissance Man
Earnathon – get paid to learn about crypto
The Usual Disclaimer
Please don’t take any of the above as financial or investment advice. It is intended to be nothing other than a little entertainment and information sharing. Always, but always, do your own research before committing your money to anything.