FAQs

Do you have a diagram?

Why do we need CXDS?

CXDS serves a crucial purpose by enabling users to create credit default swaps (CDS) that track deposits in centralized exchanges. When users deposit their assets into centralized exchanges, they essentially loan their assets to the exchange, trusting that these assets will be held in safekeeping by the exchange. Unfortunately, past incidents involving exchanges like FTX, QuadrigaCX, and Mt. Gox have revealed the vulnerabilities that can lead to the loss of user funds.

However, there are limited options available for users to safeguard their deposits in such scenarios. This is where CXDS plays a vital role as an instrument that offers certainty to the ecosystem. Additionally, CXDS opens up an opportunity for users to generate yield by providing security for deposits on centralized exchanges.

How do we determine if a default has occurred?

To assess whether a default has transpired, CXDS relies on a Decision Board appointed for each pool. This board consists of KYC-verified community members who bear the responsibility of determining whether an exchange has defaulted. To ensure the board's actions are carried out in good faith, a voting mechanism has been implemented to align incentives with rational decision-making.

Are these the same as TradFi CDS?

Not quite. The technical term for the CDS provided here is a "reverse zero-coupon swap." In CXDS, the buyer pays the premium upfront, and the collateral is locked until either the maturity date is reached or a default occurs. The seller of the CDS can claim the premium earned once the contract is sold. This unique structure guarantees the availability of collateral during the coverage period while offering upfront yields to sellers.