Cardano: Algorithmic Stablecoin DJED to Debut in January 2023

Paigambar Mohan Raj
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Cardano (ADA) and COTI have partnered to launch a new over-collateralized algorithmic stablecoin, Djed. As per the official statement, Djed will launch on the Cardano mainnet in January 2023. However, it will be subject to a positive audit and several stringent stress tests. The coin will be pegged to the US Dollar. The creators claim that Djed will be backed by Cardano ($ADA) and will use $SHEN as its reserve coin.

Selected partners and Decentralized Exchanges (DEXs) will incorporate the algorithmic stablecoin and compensate users for providing liquidity using Djed. The developers intend to slowly provide $ADA liquidity to the Djed smart contract to allow a growth rate that is healthy and sustainable.

According to Shahaf Bar-Geffen, CEO of COTI,

“Recent market events have proven again that we need a safe haven from volatility, and Djed will serve as this safe haven in the Cardano network. Not only do we need a stablecoin, but we need one that is decentralized, and has on chain proof of reserves.”

Will Cardano’s stablecoin share the same fate as Terra’s UST?

Algorithmic stablecoins became the center of discussion after Terra’s UST stablecoin and LUNA (Now LUNC) collapsed in May. Companies like Terra have made an effort to create algorithmic stablecoins that do away with the need for trust in a centralized issuer. However, the UST and LUNA tokens of the ecosystem fell to zero, making regulators and businesses skeptical of algorithmic stablecoins.

In May, a developer and supporter of Cardano (ADA), going by the handle nazarcapital on Twitter, highlighted how the additional asset, SHEN, can keep DJED from being de-pegged even in difficult times.

The primary native asset of the Cardano (ADA) protocol, ADA, will back Djed (DJED). However, SHEN, another coin, was incorporated into its design to guarantee its stability. SHEN bonuses will step in if there is not enough ADA to pay out to DJED holders.

Additionally, SHEN is further shielded from inflation because SHEN minting ends when the reserve ratio reaches 800%. The new stablecoin will use a tri-coin system with ADA, SHEN, and DJED. DJED aims to address the primary limitations of the stablecoin market.

How Djed performs, and if its safety measures keep it from crashing like UST, are yet to be seen. Many will have their eyes on the project, and the audits and test report that they might publish.

At press time, ADA was trading at $0.301150, down by 1.5% in the last 24 hours.