Cardano has teamed up with COTI, a DAG-based Layer 1 protocol for enterprises, to venture what it refers to as an over-collateralized algorithmic stablecoin. This stablecoin is backed by surplus collateral in the form of crypto stored in a reserve. The announcement of the coin was made during the Cardano Summit 2022.
Djed will go live on the mainnet in January 2023, pending a successful audit and a series of rigid stress testing. Developers working suggest that Djed will be pegged to the US Dollar, supported by $ADA, and will utilize $SHEN as its reserve coin.
Reserve coins are digital tokens that support the algorithmic peg of stablecoins. By trading Reserve Coins, users can contribute to the stablecoin mechanism by delivering suitable liquidity to maintain a good peg ratio.
The algorithmic stablecoin will be linked with selected partners and Decentralized Exchanges (DEXs), who will cite users for supplying liquidity using Djed. In a bid to extend at a sustainably healthy pace, the developers plan to move forward with a gradual and slow approach to equipping $ADA liquidity to the Djed smart contract.
Shahaf Bar-Geffen, the CEO of COTI made the official announcement at the Summit.
The COTI CEO remarked that Recent market events have demonstrated again that we need a safe haven from volatility, and Djed will operate as this safe haven in the Cardano network. The CEO also emphasized that not only do we need a stablecoin, but we need one that is decentralized and has on-chain proof of reserves.
Shahaf Bar-Geffen also revealed that they will provide a mobile app that will help users acquire the stablecoin.
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Despite the downtrend in the market and crisis involving big firms such as FTX and Genesis, the ADA community shows positivity especially after the network revealed the Vasil Hard Fork Upgrade. At the time of writing, the $ADA was trading at 0.30 USD. It will be interesting to see how this new endeavor pans out considering the crypto winter isn’t ending anytime soon.
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