Cardano will have its first Stablecoin —Djed— soon, making room for cheaper transactions and making it easier to run DeFi projects.
Software development company COTI announced a few hours ago that Cardano will have its first Stablecoin soon.
The news was revealed for the first time by Charles Hoskinson, leader of Cardano, and Shahaf Bar-Geffen, CEO of COTI Group, onstage at the Cardano Summit in Laramie, Wyoming.
Stablecoin Djed will be issued in Cardano and will promote the growth of its nascent ecosystem, especially now that the blockchain is starting to support smart contracts and markets have high expectations about the possible development of DeFi platforms in a blockchain that has been heralded as the future Ethereum Killer.
What is Djed and why does Cardano need a Stablecoin?
A stablecoin is a cryptocurrency designed to maintain a stable value against a reference. The best known stablecoins are cryptocurrencies like USDT or Stasis, pegged to fiat currencies like the dollar or the euro. However, there are cryptocurrencies whose value is tied 1:1 to other commodities such as gold (such as Digix) or even to other cryptocurrencies or cryptocurrency baskets.
There are several methods to achieve this relationship, some more effective than others. The most popular is the holding or blocking of an amount of the reference asset that supports the issuance of a proportional amount of the corresponding stablecoin:
For example, the market capitalization of USDC is $3,677,063,935 because there are 3,677,063,935 USDC tokens outstanding and Circle holds $3,677,063,935 in escrow.
In Djed’s case, the value is kept stable by an algorithmic design, which takes advantage of the smart contract design in the Cardano blockchain to keep a price as close to $1 as possible. To achieve this, Djed maintains a reserve of base currencies while extracting and burning other stable assets and reserve currencies to stem fluctuations.
Visual representation of how Stablecoin Djed will work in Cardano.
According to their white paper, there will be two versions of Djed: a minimal one, designed primarily to serve as a medium of exchange, and an extended one, whose smart contract uses a continuous pricing model and dynamic rates to react more quickly to external events, they guarantee an optimal level of reservations and provides even more security when performing complex operations such as those performed in DeFi protocol transactions.
A Promising Development
Shahaf Bar-Geffen, chief executive of COTI Group, told the conference that using a stablecoin like Djed will allow users to maintain greater control over their transactions, thanks to its stable value and low fees.
Blockchain participants are using stablecoins to engage in daily transactions as they allow the monetary value to be exchanged continuously, regardless of the location of the sender and recipient. I believe that adding stablecoin Djed to the Cardano blockchain will significantly improve how transactions are settled on the platform.
For his part, Charles Hoskinson was excited about this new project as it would be one of the most ambitious implementations aimed at strengthening the Cardano ecosystem.
Stablecoin Djed could be a game changer in crypto space, attracting an entirely new audience at a time when the industry is already experiencing astronomical growth. COTI is a long-time partner of the Cardano ecosystem. It’s great to have them on board this new venture.
This appears to be an important move for COTI. When its partnership with Cardano was first announced, the COTI token soared by 50%, reaching an all-time high (ATH) of US$0.60 in a few hours.