HARBOR Protocol is the decentralized application (dApp) on the Comdex chain that permits safe listed assets to be locked in Vaults in order to mint Composite ($CMST). It is powered by the Cosmos SDK and CosmWasm smart contracts. The protocol enables users and market makers to capitalize on arbitrage opportunities with its StableMint feature, ensuring the maintenance of Composite peg in secondary markets.
The protocol also creates an avenue for users to earn interest by depositing Composite in its Locker module.
The Locker module enables any $CMST holder to earn varying interest on their principal just by locking their $CMST into the Locker vault in the Harbor Protocol. There is no minimum amount of $CMST required to earn the interest from the vault and users can withdraw any or all of their $CMST from the vault at any time.
THE $HARBOR TOKEN
The veHARBOR token holders are the major stakeholders of the protocol. Every unit of the veHARBOR token entitles its holder to a vote, which is cast in governance polls that any veHARBOR owner can instigate.
$HARBOR as a recapitalization source
Complementing its function as a governance token, $HARBOR token is also intended to maintain the health of the system in case of exceeding debt in the system and be the final backstop to re-peg Composite token in secondary markets ( during catastrophic events such as the black swan event).
If there are a multitude of bad debts existing in the system which do not generate revenue with the expected interest, the system surplus will start depleting. If the system surplus falls below a certain safety limit, then new $HARBOR tokens are minted and auctioned off via Debt Auctions in exchange for $CMST.
Inversely, if the system is in a healthy state and if the surplus is growing at a steady state and crosses above the surplus limits, the protocol buys back and burns Harbor tokens from the supply via Surplus auctions.
This concept enables the protocol to align with long-term token holders, incentivize borrowers, and boost user participation and engagement with the system.
Incentives for veHarbor holders
The weekly rebase amount of veHarbor is distributed based on the veHarbor to Harbor ratio. The rebase amount in veHarbor is proportionally locked from the time received for the period chosen by the user at the start. In this way, your original position will stay undiluted with increasing emissions.
Protocols can incentivize the minting of $CMST through their tokens by providing external incentives to veHarbor holders. The external incentives work similarly to the concept of ‘bribing’. External incentives can be added to whitelisted vaults and are distributed only to voters on that vault.
Voters can claim rewards after every week, proportional to their voting power.
USE CASES OF THE HARBOR PROTOCOL
- MINTING COMPOSITE ($CMST): The process of minting composite starts with the opening of vaults through depositing collateral. There is a drawdown fee subtracted on every vault opening which is a fixed percentage charged on the Composite borrowed. The drawdown fee is also charged on every subsequent borrow of Composite from open vaults. The drawdown fee collected is sent to the Collector module.
Opening a vault creates a Vault ID specific to the wallet address.
The outstanding Composite debt accrues interest per block which is added back to the outstanding composite debt. These interest rates vary across asset types and vault risk types, with the riskier combinations having higher interest rates.
With the edit Vault feature, a user can modify his open Vault by either withdrawing his collateral, depositing more collateral, borrowing more Composite, or repaying his existing debt.
- Withdrawing Collateral: A user can withdraw deposited collateral as long as the collateral ratio is above min collateral ratio
- Add Collateral: A user can deposit more collateral
- Repay Debt: A user can repay borrowed composite as long as the debt is above the debt floor
- Draw Debt: A user can draw more debt from the vault, as long as the collateral ratio is above min collateral ratio. Doing so also incurs a drawdown fee
- Close Vault: With this functionality, a user can close his vault. The composite to be returned ( subject to availability in the wallet) is returned and the locked collateral is transferred to the user’s wallet.
When debt is repaid, first the interest is deducted and transferred to the collector and then the debt is reduced.
2. EARNING INCENTIVES: In the Earn feature, the User can deposit Composite in the Locker module and earn interest which is compounded and added back to the locker module. There is no bonding period, and the user can withdraw composite at any time.
The interest earned in the locker module is subject to change for existing lockers, and this is reviewed periodically and changed via governance.
3. OPENINGS TO ARBITRAGE OPPORTUNITIES: Users can also interact with the Stablemint feature to make use of arbitrage opportunities by swapping USDC with $CMST
The stablemint feature will have some basic transaction fees which will be a percentage of the transaction of the value being traded.
Users can also partake in three types of auctions:
Locker Stability Rate ( LSR) is the term used to define the interest rate applied in the Locker module. This interest rate is also compounded per block ( just like the stability fee) and added back per block to the principal in the user’s locker. This sum now becomes the principal for the next block. To estimate the calculations easily, LSR should be calculated annually as per the equation and example below. The calculation of interest earned per block is computed with the Rewards module.
Locker’s primary goal is to maintain $CMST’s peg. The Locker Savings Rate will be used in tandem with the Stability Fee to balance the supply and demand of $CMST as it incentivizes users to reduce the supply of $CMST by locking it in the locker module.
It is important to note that the LSR will be reviewed periodically and changed through governance polling frequently, affecting the existing locker positions too. Locker users are advised to keep up to date with the governance proposals and monitor the app frequently for changed LSR.
The Harbor protocol is a Comdex chain (Interchain Stablecoin Protocol) dApp that allows safelisted assets to be locked in Vaults and mint Composite ($CMST). The Comdex chain works as a DeFi infrastructure layer for the Cosmos ecosystem. Comdex provides a variety of interoperable plug & play modules for projects to use to create their own DeFi platforms providing utility to the Cosmos community as well as DeFi users worldwide.
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