ADA-backed stablecoin ‘Djed’ launched on Cardano blockchain.
Having successfully passed security auditing, Djed has deployed on the Cardano mainnet.
Djed (DJED) is an algorithmic stablecoin, meaning that it is a crypto asset reliant on two types of tokens: the stablecoin and another crypto asset supporting the aforementioned stablecoin. The ‘algorithmic’ part refers to the smart contract which governs the relationship between stablecoin and its backing crypto asset.
The last algorithmic stablecoin which made headlines was TerraUSD (UST), which collapsed in a disaster of three acts. TerraUSD used Luna as a floating-rate cryptocurrency to back up its fixed dollar exchange rate. Two traders broke Terra’s peg in May 2022, to which Terraform Labs responded by committing nearly $2 billion in Bitcoin to defend UST’s peg. The result, however, is UST’s loss of its $1 peg and Luna’s price plunging 96% in a day.
Since then, the market for algorithmic stablecoins has declined. And yet, Cardano network developers launched the ecosystem’s overcollateralized stablecoin on January 31, 2023. The stablecoin is pegged to the U.S. dollar and uses the Shen (SHEN) token as its reserve coin.
Djed is backed by ADA — Cardano blockchain’s native token, which uses a proof-of-stake (PoS) consensus mechanism, meaning that ADA owners can stake their coins for the opportunity to check new blocks of transactions and add them to the blockchain.
Djed is a product of Cardano’s partnership with COTI, a DeFi service provider whose CEO, Shahaf Bar-Geffen, described the stablecoin as a much-needed “safe haven” from market volatility.
“Not only do we need a stablecoin, but we need one that is decentralized, and has on-chain proof of reserve.”
It is unclear how the ‘overcollateralized stablecoin’ will provide a safe haven from crypto market volatility, but Cardano network doesn’t plan on stopping at it. Cardano’s ecosystem will expand with custom side-chains and other projects.