Real-World Assets, or RWAs, seem to be the next narrative in the blockchain space. If RWAs are on-chain, we call them synthetic assets. In other words, you have exposure to RWAs on a blockchain. The Indigo Protocol offers these synthetic assets. Moreover, in a decentralized non-custodial way. It does this by using the Cardano blockchain.
So, let’s find out about this interesting narrative of Indigo Protocol.
🔮March in review: @Indigo_protocol continues to break new ground, with the #CardanoCommunity right by its side. #DeFi
24.75M USD #TVL
11.57M USD iAsset MC – $iUSD, $iBTC, $iETH
4.09M $INDY in Circulating Supply
2.1M $INDY Staked (51% of Circ Supply) pic.twitter.com/BoJU2QvRs5
— Indigo | Synthetic Assets on Cardano (@Indigo_protocol) April 7, 2023
What Is the Indigo Protocol?
The Indigo Protocol allows you to create synthetic assets. These, you need to collateralize. The protocol refers to them as iAssets. Indigo does this with smart contracts. As a result, they are a decentralized and non-custodial protocol.
The protocol runs on the Cardano blockchain. We have Indigo on our list of Top Cardano Projects. See the video that we just released. It is one of the up-and-coming Cardano DeFi platforms.
So, these iAssets track the price of an underlying asset. They use oracles for this. To clarify, these are not wrapped assets! They are not bridged between chains. But here is a sample of an iAsset. For example, Bitcoin. Now you can mimic the Bitcoin price action. It’s an asset that is not part of the Cardano ecosystem. However, you can track it and trade it, without actually owning Bitcoin.
Here’s the reason I used the Bitcoin sample. Currently, only iBTC and iUSD are available for minting on the protocol. But, you can turn anything with a real-world price into an iAsset. The DAO members can suggest iAssets to add to the protocol.
Anybody can propose the creation of a new iAsset. You can go to the Governance Forum and propose a new addition. Other members can now vote on your, or any other, proposal.
🧠Indigo UX Tips & Tricks Thread #2
1⃣Hardware Wallet support is working for @eternlwallet and @NuFi_Official with the Indigo Web App! 🎉
2⃣Simplified UI for users staking their $INDY
3⃣Added flexibility to the CDP page fields when setting the user's desired CR #Cardano pic.twitter.com/WKnVaxuTcX
— Indigo | Synthetic Assets on Cardano (@Indigo_protocol) December 1, 2022
How Does the Indigo Protocol Work?
The Indigo Protocol works in a straightforward and easy-to-understand way. You need to put down collateral for each of the iAssets. We call this a Collateralized Debt Position or a “CDP.”
The least amount of locked collateral is 10 ADA. So, if you want to mint an iAsset, you need to provide collateral. You have two options here, for instance:
- Put down 150% of the asset’s current value in a Cardano stablecoin.
- You can also use ADA or other iAssets. However, this requires you to put down 200% collateral.
Be aware, though, that liquidation is also an option. For example, if your position drops below the minimal collateral ratio. In other words, the more collateral you put up, your collateral ratio increases. This reduces the liquidation risk.
You can also withdraw a part of your CDP or close it. For the latter, you need to burn all the iAssets you minted. However, any withdrawal increases your liquidation risk.
🧠Indigo CDP Liquid Staking is unique to #Cardano & allows users to earn Cardano staking rewards while their $ADA is used as collateral in their CDP!
Watch this demo to see how this powerful Indigo feature works in real-time: $INDY pic.twitter.com/r56vHRMIwL
— Indigo | Synthetic Assets on Cardano (@Indigo_protocol) December 10, 2022
Using iAssets in the Indigo Protocol also gives you some advantages. For example:
- You can have fractional shares. That means that many assets are now accessible.
- There’s no restriction on trading hours or geographical location. You can trade 24 hours per day, 7 days a week, from all over the world.
- There’s no need to buy and custody the real-world assets. The underlying asset gives you the price exposure.
- Outside of Western countries, there are restrictions on using foreign equities and forex markets. However, with Indigo, you can access these markets. There are no restrictions like you may encounter with native TradFi systems.
- On-chain fractional orders can be executed immediately. There’s no need to aggregate them, like with TradFi.
- Liquid staking. You can stake the ADA collateral that you used for the CDP. This allows you to earn passive income.
Below is a picture of the Indigo Protocol UI.
Source: Indigo app
The INDY Token
The Indigo Protocol has its own governance token, INDY. It’s a Cardano native asset. Its main use case is for voting on governance (DAO) proposals. The token had a Fair Launch. In other words, there were no pre-sales.
Before you can vote, you need to stake INDY. Be aware that once you vote, your INDY gets locked up. That is, until the Voting Period ends. So, be careful how much of your INDY you vote with.
You can also submit an on-chain proposal. This requires a 100 INDY deposit. You get the deposit back if your proposal passes. Otherwise, it ends up in the DAO treasury.
The current price of INDY is $1.78. It has a market cap of $7.5 million. There are 35 million INDY tokens. That’s a fixed amount, and, for example, there’s no burning or minting mechanism in place. INDY is available on Minswap and Sundaeswap.
We looked at the Indigo Protocol. It offers decentralized and non-custodial RWAs or Real-World Assets that are synthetic. These are the iAssets. You need to collateralize all iAssets.
⬆️ For more cryptocurrency news, check out the Altcoin Buzz YouTube channel.
⬆️ Our popular Altcoin Buzz Access group generates tons of alpha for our subscribers. And for a limited time, it’s Free. Click the link and join the conversation today.