Djed, an Overcollateralized and Algorithmic Stablecoin, Now Live on Cardano
USD-pegged algorithmic stablecoin Djed launched on the Cardano mainnet on Tuesday. The stablecoin was developed by the blockchain firm Coti and is over-collateralized by 400-800% with ADA, Cardano’s native coin, while SHEN will serve as a reserve token.
Djed to be Integrated into 40 Cardano Apps
Djed, a US dollar-pegged stablecoin, has launched on Cardano’s mainnet after a year of development by blockchain firm Coti and Cardano’s key developer Input Output. Each Djed stablecoin will be over-collateralized by 400-800% with Cardano’s native token ADA, while the SHEN token will act as a reserve coin.
The high collateralization makes Djed similar to the Ethereum-powered stablecoin dai. However, its minting and burning model is more similar to other algorithmic stablecoins.
The launch of the stablecoin aims to provide a more stable alternative to volatile cryptocurrencies. Djed will mainly be used on decentralized finance (DeFi) protocols within the Cardano ecosystem.
The new stablecoin will be integrated into 40 Cardano-based apps. Popular decentralized exchanges (DEXs), including MinSwap, Wingriders, and MuesliSwap have already announced their support for the token. Coti, a firm that developed a proprietary blockchain protocol for building loyalty networks, said in November it will roll out DjedPay – a service allowing merchants and crypto firms to accept stablecoin payments.
“Djed takes what’s great with crypto as collateral, meaning no fiat in the system, but also takes over-collaterization very seriously.”– Shahaf Bar-Geffen, CEO of Coti, said in an earlier statement.
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Overcollaterized and Algorithmic
The launch of Djed comes on the heels of a highly challenging year for Cardano and the broader crypto market. ADA token has plummeted more than 80% at one point in 2022 amid a crypto winter and a string of collapses, including the algorithmic stablecoin TerraUSD (UST) and Sam Bankman-Fried’s FTX.
But on a more positive note, Cardano’s 2023 roadmap includes several exciting updates and projects, including the launch of Djed. Like other algorithmic stablecoins, Djed is pegged to the US dollar, meaning it maintains the same value as $1.
Backed by ADA, Djed employs a smart contract to maintain its peg to the greenback. This allows users to transfer ADA to the governing smart contract and receive an equivalent amount of Djed, creating a pool of ADA tokens that backs each Djed in circulation.
The ultimate goal of this stablecoin is to become the main currency with which all transaction fees within the Cardano ecosystem will be paid. This model is expected to allow for consistent transaction costs and avoid volatile gas fees.
Do you think the launch of Djed could trigger a turnaround for the troubled Cardano blockchain? Let us know in the comments below.