Introducing Composite (CMST) — Stablecoin for (Inter Blockchain) IBC
For all the amazing utilities we can possibly derive from DeFi, We can’t overemphasize the need for a decentralized stablecoin in the DeFi ecosystem. Stablecoins are a perfect means of protecting funds from price fluctuations in the cryptocurrency market. This is made possible because of these stablecoins are mostly pegged to Fiat except for peculiar cases like Terra’s UST which was quite algorithmic in its mechanism.
Comdex, apart from being a synthetic commodity marketplace, has always aspired to be an ecosystem of solutions to the Cosmos ecosystem and in the long run aims to bridge the gap between Centralized Finance and Decentralized Finance.
And introducing a robust, decentralized, and censorship-resistant stablecoin is one of the numerous ways they plan to achieve this objective. This article will discuss extensively about Composite (CMST) the stablecoin from Comdex that will enable liquidity solutions for the Cosmos ecosystem and power the IBC initiative.
What is Composite?
Composite is a stablecoin that is programmed to be a stable representation of purchasing power and is pegged to the US dollars at $1, although, this may be altered in the future depending on future developments in the global market.
There has been a lot of successful stablecoin mechanisms in the past and Comdex is inspired mainly by the model adopted by MakerDao and even DAI. Comdex would enable a permissionless minting process where $CMST would be minted as a debt against over-collateralized CDPs. Users can mint $CMST by locking-up their Cosmos ecosystem assets as collateral for $1.
$HARBOR, the governance token for $CMST, will serve as a backup to help maintain the $CMST peg through a mint and burn based mechanism.
The Utilities Of $HARBOR
$HARBOR will serve as the governance token for managing policies on the Comdex protocol. The main objective of the protocol governance will be to ensure that $CMST maintains its peg while sustainably accumulating interest APR from $CMST creation as a result of demand from investors.
The protocol will earn revenue from interest apr fees, CDP fees, and liquidation fees, the surplus will then be used to buy-and-burn $HARBOR.
The protocol will operate in such a way that when $CMST trades above its $1 peg for prolonged periods, the protocol will mint $CMST to buy-and-burn $HARBOR in order to maintain the peg but when $CMST trades below peg, the protocol will mint $HARBOR to buy-and-burn $CMST. This model will enable $HARBOR holders to accrue value from the increased $CMST adoption.
Not too long ago, we experienced the massive crash of UST, this has made a lot of investors to be a little skeptical as far as stablecoins are concerned. The fact that stablecoins, generally perceived to be a safe haven for funds could be compromised has sent warning signs to cryptocurrency investors.
However, no cause for alarm, as the stablecoin model for $CMST is completely different. Combining the over collateralized CDPs mechanism and the mint/burn model for $HARBOR just so that the $CMST peg is constantly maintained, Composite looks promising already.
COMDEX is a decentralized synthetics protocol in the Cosmos ecosystem. Comdex builds solutions to democratize finance by giving investors exposure to a large range of asset classes.