Comdex Championing The Provision of Synthetic Assets To Create Derivatives for Financial Assets
Traditional financial models are rigid and provide a lot of problems for investors, particularly those with limited access to financial assets and opportunities since there is no equal access to finance. Although the financial sector is again undergoing a significant wave of change just as the emergence of the internet offered regular investors easy access to equities and forex markets. This new wave is centered on distributed ledger technology (popularly known as Blockchain Technology) which enables average investors to access a complete myriad of global and vibrant investment opportunities. Notwithstanding many are yet to leverage it.
Owing to the stringent nature of traditional financial instruments, investors who are unable to keep up with inflation are now looking for possible alternatives but are open to very limited options. And since many of them lack access to safer products that focus on long-term favorable ROI, their only options are unpredictably high-risk asset classes.
Fortunately, this setback only gives rise to a new market opportunity. Comdex took advantage of the opportunity and established a money flow gateway by employing Synthetics which creates a variety of derivative contracts that can provide general access to any asset for any investor. A wider choice of derivative synthetics would also enable investors to diversify their risk and hedge their positions using different techniques.
As a result, Instead of using a single investment asset, investors can access several financial opportunities using synthetic assets. The value of all derivative contracts is estimated to be $1.2 quadrillion, a figure extensively larger than the total value of global real estate, global debt, global stock markets, and the world’s gold supply.
Now, investors can profit without a physical settlement, arbitrage trades, transfer risk, and hedge against price changes by using derivative products. If properly employed, derivatives can help eliminate price risk from a wide range of assets, including commodities and debt. But can also worsen market inefficiencies by pushing traders to compete on a zero-sum basis rather than creating actual market value.
Before going further, let’s take a look at ComDex and how they are transforming the commodity market using synthetic tools.
Comdex is a synthetic asset ecosystem that enables the unlocking of a broad range of commodities, debt assets and liquidity, allowing equity to flow swiftly from DeFi to CeFi. The protocol is critical to Comdex’s overarching objective of democratizing finance. For investors to have global financial access, the creation of digitally tradeable representations of a wide range of assets is essential.
The Comdex ecosystem is built on the Cosmos Ecosystem’s key fundamentals of interoperability. The solutions can operate together to aggregate liquidity from various DeFi ecosystems and expedite the flow into CeFi (centralized finance). Synthetic assets are the cornerstone of the Comdex idea, and they work by bridging the gap between other crypto ecosystems and financial instrument markets.
Comdex is based on the Persistence ecosystem, and it is assisting in the democratization of finance as well as the improvement of trust and efficiency in the industry. Before the introduction of Comdex, learn more about it.
How Synthetics Function
First, it’s important to know that synthetic assets are also known as Tokenized derivatives. Generally, derivatives are representations of stocks or bonds that a trader does not own but seeks to purchase or sell in the traditional financial sector. A derivative, in simple terms, allows you to profit from the price changes of a stock you do not own. Synthetic assets (tokenized derivatives) went a step further into this approach by storing the derivative’s record on the blockchain and converting it into a digital asset token.
How Synthetics works on Comdex
Synthetics offer collateralized debt which provides exposure to the price movement of real-world assets. It can be used to provide liquidity, borrow money, and speculate on a wide range of assets. As a result, synthetic assets are crucial to the goal of financial democratization.
The Comdex synthetics exchange makes it easier to create and trade synthetic assets on the blockchain. How? Users will be able to mint synthetic assets on the chain which is known as ‘cAssets’. Every commodity on the network has its own ‘cAsset’ token, which can be traded on the cSwap — Comdex’s AMM (Automated Market Maker)module. Some of the platform’s important stakeholders are as follows:
- Liquidity Providers. These are users who want to earn trading fees and CMDX token (Comdex native token) incentives by supplying liquidity to liquidity pools on the cSwap in the form of cAsset pairs.
- Traders are people who utilize the platform to profit from the price movement of cAssets on cSwap.
- Borrowers: Also known as Minters, they are users who create the initial liquidity of cAssets on the platform. To mint cAssets, these users can lock up a variety of Cosmos assets. When the user returns the cAsset debt to liberate their collaterals, the user’s collateralized debt position (CDP) can be closed. The Comdex trading solution ensures that for each listed asset on cSwap, users can long or short position-based liquidity.
Before now, investors faced a lot of geographical and legal limitations to access a varied range of financial assets. Creating synthetic assets allows capital to flow freely between asset classes. Also as against the traditional derivatives markets, real-world assets can be tokenized using Comdex solutions.
The vision is to allow average investors to trade commodities futures without having to face stringent opposition. Comdex positioned its focus to make commodities more accessible to these average investors. The protocol is still putting a lot of work and developments in place to ensure that every equal flow of financial options reach everybody. As the commodity trading industry rebounds from global disasters, this is no doubt what the world economy needs going forward.
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