In decentralized finance (DeFi) one of the benefits is composability, which focuses on the system’s building blocks (tokens) that can freely interact with one another to form new services. An example of this is a stablecoin. This is a token that has a fixed exchange rate and is backed by token collaterals.
As we can use stablecoins to facilitate payments and exchanges, its utility can also be traced to earn returns in a potentially multiplicative model also known as Yield farming.
In this article, we shall be considering how a stablecoin that is decentralized can power Decentralized Finance in Cosmos Ecosystem.
The introductory note above has revealed that stablecoin is the backbone of DeFi but in what way does this benefit the users in the Cosmos ecosystem, knowing that UST a stablecoin of LUNA became unstable (crashed to zero) and sent many back to their village in May 2022?
One of the stablecoins' benefits is its Stores of Value.
The most popular stablecoins in the crypto market are backed by USD. Examples are USDC and USDT, but they have a big challenge which is their centralization. It's very clear that the majority of DeFi users seek true decentralization, especially those who may live in jurisdictions subject to government censorship. This is where the overcollateralized model has proven to be the most resilient option, bringing decentralization into DeFi and any stablecoin that embraces this model enables users to use cryptocurrency assets as collateral to mint stablecoins, in essence providing liquidity to their funds.
An example of this Stablecoin is $CMST
In Cosmos ecosystem, there is a lack of native USD-backed stablecoins though there is USDC which is being represented via bridged stablecoins using Axelar Network USDC (axlUSDC) and Gravity Bridge USDC (gravUSDC). Since these are different versions of USDC, there is a need for separate liquidity pools in order for the smooth operation of decentralized exchanges. What does this imply?
The USD-backed stablecoin (USDC) liquidity on Cosmos is fragmented, and this is negatively affecting trade prices and ecosystem health.
CMST as the Solution
Through Harbor Protocol, CMST provides a single stablecoin that’s interoperable throughout the Cosmos, and backed by Cosmos interchain assets, as well as centralized stablecoins such as axlUSDC and gravUSDC. A result of this; users can turn fragmented liquidity into a single, stable asset in Cosmos.
There is more to $CMST as the solution, you can read the information How decentralized stablecoins will power DeFi in Cosmos
Harbor Protocol is built on Comdex as a publicly governed protocol enabling the minting of $CMST by collateralizing interchain assets.
There are four major features attached to this protocol.
It is important to know that, the CMST’s mechanism is designed to be the most reliable model for stablecoins, which is censorship-resistant, permissionless, and decentralized.
Comdex as an interchain DeFi insfrasturcture on Cosmos, is set for seamless deployment of DeFi applications in the Cosmos ecosystem and powering DeFi in the multi-chain future. Its chain is Plug & play customizable Comdex modules built on the core tenets of:
In conclusion, its not a doubt that Comdex has solutions DeFi projects can use to solve major problems many decentralized applications are experiencing. Take a walk through on the solution and leverge on them as an investor, business owner, or consumer.
