Introduction

The Credit Default Swap (CDS) protocol has been developed utilizing the Kontracts framework to create CDSs for the individual loans tracked on RWA.xyz. The CDS protocol aims to solve one of the key challenges of on-chain lending, credit risk. Users will be able to sell and buy CDSs to either gain exposure or receive security on the default risks of the underlying protocol. Moreover, unlike other insurance protocols which only provide security on certain risks and require the purchaser to prove that they personally incurred a loss. This opens the door for more advanced and dynamic markets as well as the possibility to create synthetic loan markets.