Comdex is the latest asset of the Osmosis DEX. But what is Comdex exactly and what do they aim to achieve? An article diving into the basics of Comdex.
What does Comdex deliver?
The mission of Comdex is “to democratize finance and bridge DeFi and CeFi” (source). Anyone participating longer in the cryptosphere has heard about DeFi (decentralized finance), but may not have heard about CeFi (centralized finance). Coinbase has written an article about this to explain what CeFi is. Comdex strives for a system where the guarantees present in CeFi are also extended to the DeFi-space and therefore combining the best of both worlds.
Furthermore, Comdex offers the possibilities to not only expose yourself to the price movements of crypto combined with DeFi, but to also expose yourself to the price movements of global commodities like for example gold, iron, grain, oil or soybeans.
How does it work?
Comdex is building a platform where it is possible to mint assets which represent global commodities. Using crypto (for example $ATOM or $CMDX) as a collateral you are able to mint a cAsset, representing a global commodity. This is also called a synthetic (this protocol is build on Cosmos SDK).
This process enables you to speculate on the price movements without going through the hassle of actually having to own that asset. Nobody wants to buy a ton of soybeans, store it somewhere and sell it again when the price has risen compared to your purchase price. And the same accounts for oil, gold, iron, etcetera. By minting a cAsset you virtually own the asset, giving you the same possibility to wait for a higher price to sell, but not having the headaches of the storage.
Now you might think, but what happens if the price of my cAsset drops? The process of creation of cAssets on the platform is accomplished through Collateralised Debt Position (CDP). According to this link it works as follows to prevent large losses;
In each CDP, a minimum collateral ratio is to be maintained (value of locked-up collaterals being higher than than the value of the cAssets created) to ensure that the open debt position remains protected against price movements to the underlying collateral assets. In the event the price of the collateral assets falls, driving the collateral ratio below a minimum threshold, a liquidation event is triggered where the locked up collateral, equivalent to the value of the outstanding debt plus liquidation fees, is auctioned off to buy and burn the cAssets. Any portion of the collateral, in surplus of the debt and fees, is returned to the owner of the CDP.
But minting and burning cAssets is not all Comdex is aiming for. The plans also contain a DEX for synthetics to remove the necessity of burning cAsset A and minting cAsset B if you want to swap towards a new global asset.
The synthetics DEX is planned to work like a DEX we know. Comdex calls this DEX cSwap. On the DEX you can interact with liquidity pools which can be used to swap between cAssets.
This DEX also offers multiple possibilities to earn on having cAssets beside price speculation as shown below;
The $CMDX token is the native token of the Comdex network. The token has 5 purposes (source); staking / network security, governance, collateral for minting cAssets, rewards for liquidity providers and other participants offering critical functions in the network, serving as a method to ensure solvency of the net debt of the network.
Initially 100 million $CMDX will be minted at genesis. The first year the inflation is set to 30%. Each year after the inflation will decrease by a factor of 25% (so year 2 inflation will be 22,5%, year 3 inflation will be 16,875%, etcetera). In the end the capped maximum supply is 200 million $CMDX.
From the initial 100 million $CMDX minted at genesis a large part is locked. During the first 48 months of the network this will be gradually unlocked, where the unlock frequency depends on the category derived from the picture above.
Osmosis will be the first exchange where $CMDX can be purchased. No price has been set in the past, making the price discovery of the coin all the more important. This will be done using a LBP (explanation to be found here). During the first days of trading the price will be determined. After the LBP has ended “normal” trading will be continued on Osmosis.