Commodities in DeFi
Commodities are a vital part of most people’s lives. A commodity is a basic product used in commerce that may be interchanged with other similar items. Grain, gold, beef, oil, and natural gas are all examples of commodities.
Commodities can help investors diversify their portfolios beyond traditional stocks. Because commodity prices tend to move in the opposite direction of stock prices, some investors utilize commodities as a hedge against market volatility.
Trading commodities is an ancient profession with a longer history than the trading of stocks and bonds.Commodities are still traded all around the world in modern times. A commodities market is a physical site where commodities are traded, as well as a legal entity designed to enforce the rules for exchanging standardized commodity contracts and related financial products.
The Commodities Market’s Characteristics
The fundamental principles of supply and demand are what drive the commodities markets in the broadest sense. Changes in supply have an effect on demand; a lack of supply means higher pricing. As a result, any large disruptions in a commodity’s supply, such as a widespread disease affecting cattle, can cause a jump in the typically stable and predictable demand for livestock. Price changes can be influenced by global economic development and technical advancements. For example, the rise of India as major manufacturing actors (and hence higher demand for industrial metals) has resulted in a decrease in the availability of metals such as steel for the rest of the globe.
Types of Commodities
Depending on the sort of commodity traded, commodity trading is now classified into four primary groups. They are as follows:
- Energy Commodities — Crude Oil, Heating Oil, Gasoline Coal, Electricity etc.
- Livestock and Meat Commodities — Feeder Cattle, Live cattle, Pork Belly, Lean hogs etc.
- Agriculture Commodities — Barley, Cocoa, Corn, Cotton, Wheat, Sugar etc.
- Metal Commodities — Aluminum, Copper, Gold, Silver, Platinum, Steel etc.
A commodity trader is a person or company who invests in physical commodities such as oil, gold, wheat, and other crops. Typically, these traders deal in raw materials needed at the start of the value chain, such as copper for building or grains for animal feed. These traders take positions based on expected economic trends or commodity market arbitrage opportunities.
Problems facing commodity trading today
- Lengthy Trade Cycles
- Falsification of crucial data
- No Ratings / Scoring system establishing the credibility of the traders
- Scarcity of Real-time discovery platforms
A DeFi solution
A modern solution is required for a growing sector. Comdex is a platform that aims to make the fragmented commodity transaction business more efficient, quick, and transparent. Comdex’s mission is to transform the fundamental process of global commodities trade in order to reduce settlement times and increase transparency, efficiency, and immutability in trade discovery and trade finance at breakneck speeds.
The Comdex platform is made up of multiple different pieces that work together to accomplish an international commodities exchange in the most efficient way possible.
Some which include:
- Trade Discovery: The Comdex platform facilitates trade discovery by linking prospective commodity buyers to active ‘sell’ listings. Utilizing the reputation system of Comdex, traders can effectively conduct due-diligence on potentially new partners.
- Trade Settlements: The Comdex settlement system offers commodity traders the ability to make cross-border payments without the use of the SWIFT system which is expensive and time-consuming.
- KYC / AML checks on both ends: The Comdex Platform aims to reduce trade settlement risk by providing trade players with up-to-date background verification information sourced from reputable dataset APIs.
- Regional Offices: Comdex is aware of the legal and regulatory requirements, and as a result, its offices are strategically positioned in the key commodity trading centers. Various components of the settlement procedure are handled by these regional offices. Management of the Original Bill of Lading, processing of domestic wire transfers, and trade-related details are examples of such obligations.
- Trade Finance: Financial institutions can use the Comdex trade finance platform to fund commodities trades that will be settled on the Comdex platform.
The COMDEX Trading Platform
The “Comdex” (Commodities Dex) Trading Platform is a Tendermint-based decentralized commodity trading platform. For the first time in history, market players from all around the world will be able to take advantage of easily accessible commodity synthetics through the “Comdex Trading Platform.”
On the platform, “cAsset” tokens are issued to represent commodity synthetics. Each commodity offered on the platform has its own unique “cAsset” token. However, because these tokens reflect a single continuous futures contract, there is only one tradeable cAsset token per unique commodity.
To provide speculators with a smooth liquidity solution, Comdex’s synthetic trading platform employs an automated market maker module. The automated market maker essentially provides liquidity in the form of both ‘cAssets’ and ‘Stablecoins,’ and is funded by liquidity providers who hope to profit from both trading fees and liquidity mining incentives in the form of the native CMDX token.
The oracle price feed for Comdex’s commodity-related synthetics products is critical since it establishes the contract’s ‘fair value’ mark price and applies liquidation measures on participating ‘Short Traders.’
Combining all the above-mentioned factors, Comdex aims to deliver a solution to enable seamless access for common investors across the globe to a restricted asset class of inherent value.
Comdex is a decentralized synthetics exchange built to democratize finance by reducing the complexities and regulatory hurdles to access investments in financial assets with intrinsic value.
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