Introduction

Composable Finance is a De-Fi platform that allows different protocols to operate as independent entities. These protocols can be customized, reassembled, and combined with others to create new projects. With composability, developers can build their protocols on top of existing projects, eliminating the need to start from scratch.

By doing so, the industry moves away from the traditional financial system, which isolates entities and complicates integration between platforms. By using the open-source and permissionless nature of blockchain technology, as well as the powerful framework and efficient cross-chain transaction of the Inter-Blockchain Communication Protocol (IBC), developers can access the functionality of other DeFi protocols. This creates an interconnected web of financial applications that boost collaboration and efficiency.

Moreover, composability fosters industry growth through rapid innovation. Developers can easily create new financial products without beginning from scratch and can also quickly bring fresh solutions to the market, leading to a constantly evolving ecosystem.

What is Composability?

Composability is the ability for De-Fi projects to interconnect and work easily with one another. While De-Fi projects are similar to modular building blocks, composability allows these protocols to be stacked upon each other to birth new products. Through composability, developers can build new services that would have been impossible in our basic banking system.

The primary goal of composability is to build a system where different projects from different networks can easily work together and connect without any friction. This is possible due to the decentralized nature of blockchain technology, such as decentralized apps (dApps) and decentralized exchanges (DEX).

One important aspect of interoperability is the Inter-Blockchain Communication (IBC) Protocol. This protocol enables developers to create decentralized applications (dApps) that can tap into assets and features from various networks. By fostering these connections and collaborations, IBC opens the door to industry innovations.

How Does Composable Finance Work?

Composable has built a comprehensive and innovative infrastructure to create new financial products. At the core of Composable Finance is the Inter-Blockchain Communication Protocol(IBC), which facilitates cross-chain communication. It is a protocol designed to handle the verification and distribution of data between two blockchains.

The Inter Blockchain Communication (IBC) protocol was created to solve the issue of cross-chain communication by providing a permissionless way of relying upon data packets between blockchains. This creates high horizontal scalability with transaction finality.

Another key component is the Composable Virtual Machine, which allows cross-chain communication through smart contracts. It enables developers to build unique cross-chain smart contracts, creating a new level of interoperability.

Lastly, the Composable Finance Platform relies on the Picasso Parachain. This infrastructure layer unites modular and interoperable substrate pallets in order to create trustless bridging, DEXs, and native oracles.

Features of Composable Finance

Composable Finance is built on a modular architecture that allows it to provide its services efficiently. These features include layers and parachains like:

Picasso

Picasso serves as the protocol’s underlying infrastructure and finality layer, providing the platform with security, platform customization, and interoperability. It also offers cross-chain communication, bringing Composable Finance closer to its goals.

Composable Virtual Machine

When trying to work compatibility into different virtual machines, developers must build new deployments for their projects on other platforms and crate and manage a bridge between the two ecosystems. This limits cooperation between smart contracts and leads to lower levels of management and control.

Composable Finance, however, is equipped with a Cross-chain Virtual Machine called Composable XCVM. It was designed to set up smart contract functions across layer one and layer2 networks. The developer-friendly interface creates a seamless initiation of callbacks into smart contracts.

More innovative tools and services are being developed to boost the XCVM and allow developers to easily control interactions between different parachains and networks while ensuring high transaction scalability and uptime.

Inter-Blockchain Communication (IBC) Protocol

The Inter-Blockchain Communication (IBC) protocol is a trust-minimized transport layer built to bridge platforms built on the Cosmos network. Composable Finance uses its trust-minimized nature to communicate between the different parts of the Composable ecosystem.

The main objective of the Inter-Blockchain Communication(IBC) Protocol is to unify different blockchain assets and the industry’s fragmented liquidity. Since its introduction to the Cosmos SDK in 2021, the IBC protocol has interlinked over 107 chains, facilitating the transfer of over five billion USD as of the end of 2023.

IBC boasts a service that is not restrictive when dealing with consensus algorithms, allowing various networks like COSMOS, Ethereum, and Solana to easily connect to it. While built on Cosmos, the IBC protocol is not limited to the network, but it can be used to extend its services outside the Cosmos network.

Mosaic

Mosaic is a transfer availability layer that facilitates cross-chain and cross-layer interactions across several networks. It enables the transfer of information and liquidity between blockchains, regardless of what layer the network was built on.

This allows users to move their liquidity whenever and wherever they want without facing the lack of liquidity maximization that plagues other platforms. This means users can move assets to platforms of their choice, giving them the most out of their assets.

Mosaic offers specifically tailored scalable solutions to De-Fi projects, making the blockchain ecosystem easier for them to navigate. It is built on the Polkadot substrate network and uses its security to increase its security and interoperability.

MANTIS Protocol

Multichain Agnostic Normalized Trust-minimized Intent Settlement (MANTIS) is an intent settlement framework built on Picasso’s trust-minimized bridge and Composable’s virtual machine. It combines the two systems to create a new platform for users to carry out cross-chain transactions.

It utilizes the security and interoperability of the Inter Blockchain Communication (IBC) Protocol and a network of entities called solvers to optimize intent settlement. These solvers compete with one another to provide the best execution of intents for users on the platform.

Lastly, the platform uses a unique intent framework. Intents are chain-agnostic, meaning they can be accepted from various chains and applications, with final settlements on any platform that uses IBC-enabled blockchains.

Parachains

Composable Finance also launches parachains on the DotSama network, combining the Polkadot and Kusama ecosystem. This greatly improves the network security and privacy. One major parachain from Composable is its Picasso parachain, built on the Kusama network that serves as the cross-chain hub for all De-Fi activities.

Composable Cosmos

Composable uses a Cosmos SDK chain to easily customize protocol features, including its consensus, and to create seamless interaction with other Cosmos chains. With this, Composable Finance is able to easily create connections with IBCs outside the Cosmos network.

Currently, Composable Cosmos serves as the IBC platform, bridging Cosmos, Composable Finance, and other chains that are not IBC compatible, like Polkadot, Ethereum, and Solana.

Composable Polkadot

The Composable Polkadot allows easy connection of Composable Finance to the Polkadot chain, boosting security and enhancing the safety of users. Being one half of the Kusama and Polkadot parachain group allows Composable Finance to create greater connections to the DotSama space.

Composable ecosystem

The Composable Finance ecosystem consists of contributors, supporters, infrastructure providers, and providers who power interoperability in the ecosystem. Some of the supporters include Coinbase, Blockchain Capital, Jump Capital, LongHash Ventures, NewForm, rarestone, Maven 11, Fundamental Labs, Advanced Blockchain and many more.

Use Cases of Composable Finance

With De-Fi products building on and interacting with one another, the possibilities are endless. Composable fosters an environment of interoperability, which gives birth to new projects and solutions such as:

Cross-Protocol Liquidity Aggregation

Through Composable Finance, liquidity can be pooled across multiple De-Fi protocols, creating more efficient ways to use assets while reducing the spread of assets across the ecosystem. This creates new avenues for yield farming, collateralized lending, and other investment strategies that help maximize profit.

Seamless integration grants users optimal control of their assets and investments, allowing them to use their capital more effectively and enhancing overall liquidity and efficiency in the ecosystem.

Stacking Yield Farming Strategies

With Composable Finance, users can deposit assets into one protocol to earn interest and deploy the interest tokens into another protocol as collateral to maximize returns. Protocols like Yearn Finance aid users in routing their funds through multiple De-Fi protocols to optimize the user’s yields on their behalf.

Through composability, stacking strategies grant users more options when making investments, boosting the maximization of returns.

Cross-Chain Interoperability

Cross-Chain Interoperability is a major driving force of Composability. By breaking down the barriers that limit protocols to the network they were developed on, composable enables the flow of data and assets between different blockchains.

This is possible through the use of bridges and warped tokens, which allow users to transfer assets between chains while storing their value and functionality. Lastly, by facilitating cross-chain interoperability, Composable broadens the scope of assets and enables the creation of a global pool of assets.

Conclusion

Composable Finance is on the path to changing the De-Fi ecosystem through a modular, interoperable ecosystem of financial services and products. By fostering interoperability, composability, and innovation, the ecosystem will open up new opportunities for developers and users alike.