COMDEX'S COMMODO PLATFORM
LENDING AND BORROWING : Traditional Finance (TradFi) vs Decentralized Finance (DeFi)
Before the advent of Decentralised Finance Technology, traditional lending and borrowing often involved a tedious process but it is all in the past now as cryptocurrency and blockchain technology have renovated the entire process.
Today, getting loans with cryptocurrency is quite less complicated than getting traditional bank loans.
WHAT IS CRYPTO LENDING AND BORROWING
Crypto lending and borrowing involves one party lending cryptocurrency to another party in exchange for interest payments. Over the years there has been a search for genuine DeFi platforms that enable lending and borrowing.
THE INTERNET OF BLOCKCHAIN : COSMOS AND IT'S ECOSYSTEM
Cosmos is an ever-expanding ecosystem of interconnected apps and services, built for a decentralized future. Cosmos apps and services connect using IBC, the Inter-Blockchain Communication protocol. This innovation enables anyone to freely exchange assets and data across sovereign, decentralized blockchains. With the ever expanding ecosystem of Cosmos, there’s a need for genuine DeFi instruments for mainstream users. It is on this note that the Commodo platform was born.
COMDEX AND ITS COMMODO PLATFORM
As earlier noted there’s a need for a genuine DeFi app on the Cosmos IBC platform for lending/borrowing digital assets. In its goal to become a DeFi infrastructure layer for the Cosmos ecosystem, Comdex aims to fill this role and provide sustainable yields for users.
To this end, the Comdex team has built Commodo, a decentralized and collateralized lending and borrowing platform in Cosmos. Below, we explore the features of this new Comdex Ecosystem product that improves the DeFi capabilities of Cosmos’ internet of blockchains.
WHAT IS COMMODO?
Commodo is an interchain liquidity protocol built on the Comdex chain to deliver decentralised, efficient & secure money markets. Commodo is built on the Comdex chain, utilizing the Lend module, which exists exclusively on the comdex-1 chain.
By interacting with the platform, depositors will be able to lend digital assets and receive yields on them. Conversely, borrowers will be able to borrow whitelisted assets by keeping their lent assets as collateral, subject to dynamic interest rates. The utilization of the assets determines these rates on the platform.
HOW DOES THE COMMODO PLATFORM WORK
By design, Commodo aims to solve some of the recurring pain points of lending and borrowing DeFi platforms, mainly:
The issue of fragmented liquidity of a high number of different pools:
Liquidity is the lifeblood of any market. However, it is usually fragmented across different exchanges making it difficult to navigate. What this means that most DeFi protocols operate within a limited Blockchain environment, making it hard to transfer liquidity from one ecosystem to another.
To solve this Commodo introduces the concept of isolated money markets with bridged assets to achieve this.The current model uses two bridged assets, which in this case are represented by Comdex’s overcollateralized $CMST stablecoin and Cosmos’ $ATOM. One of the reasons $ATOM is used as the bridge assets is to provide utility to $ATOM for the broader expansion of the Cosmos ecosystem. Money markets could be created through governance using the assets that are whitelisted in the platform and provide liquidity for digital assets by pooling them with the preset bridged assets $CMST or $ATOM. This will allow the creation of money market modules such as OSMO-CMST-ATOM, CMDX-CMST-ATOM, ETH-CMST-ATOM, etc.
By limiting the pairings to the bridged assets, the platform allows for a single lending pair for each individual token. This allows it to concentrate the liquidity that users provide instead of fragmenting it into dozens of different pools. Simultaneously, this feature provides deeper liquidity for every lending pair, as it shields users from liquidity dilution. Liquidity dilution has to do with rights on earnings that were lost due to decrease in ownership percentage.
The security flaws of shared pools:
Regarding security, since the pools are isolated and in fewer numbers, risks are equally reduced. All transactions are routed through the same bridge asset (in this case, $CMST or $ATOM), implying that only the bridge assets require trust.
In case one of the paired tokens is compromised, only the pool of this particular token will be affected, effectively isolating the risks to a single lending pool. Consequently, this isolated money market feature allows the platform to benefit from high security by design.
THE COMMODO PLATFORM : ITS MERITS
1. With Comdex's Commodo platform one can long positions by lending or short positions by borrowing: options to long or go short on crypto assets wss commonly associated with centralized exchanges. But with DeFi lending protocols, users can quickly create leveraged positions with assets supported by the protocol.
2. Earning rewards for providing liquidity for IBC assets: Liquidity providers earn fees from transactions on the DeFi platform they provide liquidity on. The transaction fees are distributed proportionally to all the liquidity providers in the pool, so the more crypto assets you stake the more fees you'll earn.
3. Capitalizing on arbitrage opportunities during times of high volatility.
4. The Commodo platform is Interoperable with the entire Cosmos ecosystem.
5. The recurring advantages of the Comdex network such as low transaction fees and near-instant transfers of value.
THE COMMODO PLATFORM : WHAT MAKES IT STAND OUT
Commodo is designed to minimize the risks and attack vectors. Commodo tries to alleviate the pain points existing in current lending borrowing markets with its characteristic architectural design.
Commodo will have isolated money markets called cPools for highly liquid assets of the Cosmos ecosystem which will also be extended to other money markets for interchain assets from Ethereum and other ecosystems. Suppliers and or borrowers of an asset can interact directly with the platform, earning and or paying a floating interest rate without having to negotiate terms such as maturity, interest rate, or collateral with a peer or counterparty.
Comdex develops possible solutions for the decentralization of finance (DeFi) and the democratization of commodities by handing investors the knowledge of a widened scope of asset classes with rewarding features.
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