Designed and developed by fintech COTI, the DJED algorithmic stablecoin is expected to see the light next week on the Cardano (ADA) blockchain. The DJED will be pegged to the US dollar, and will be secured by both ADA and SHEN, a token available for staking which will allow part of the fees collected in the mint and burn processes of the stablecoin to be received.
DJED is coming to Cardano soon
The DJED stablecoin will therefore be the first stablecoin developed specifically for the Cardano (ADA) blockchain, as it should be available next week.
Designed and developed by the fintech COTI, specialized in digitizing currencies and creating digital payment solutions, the DJED will be an algorithmic stablecoin whose over-collateralization should be maintained between 400 and 800%according to the available documentation.
We are happy to share another update on Djed’s progress and inform you that the launch is scheduled for next week!
— COTI (@COTInetwork) January 24, 2023
“We are happy to share a new update on Djed’s progress and inform you that the launch is scheduled for next week! »
This sizeable over-collateralisation should theoretically allow you to avoid a scenario similar to that of Terra (LUNA) that we were able to observe in May 2022, the result of a simultaneous decline of LUNA and UST, the 2 cryptocurrencies were closely linked before their collapse.
For simplicity, an algorithmic stablecoin is structured to self-regulate to ensure parity with its reference asset, often the US dollar. The algorithm must allow to buy stablecoins when the price is low and, conversely, to sell them when the price is high.
Note, however, that this is not Cardano’s “official” stablecoin, as the blockchain is expected to issue its own via Emurgo during the first quarter of the year as part of the launch of its Azens product line. USDA baptizedit should be fully backed by a US dollar reserve, unlike DJED which will be backed by ADA.
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What will be the specificities of the DJED?
To receive DJED, Cardano users will need to send ADA to the corresponding smart contract. The price of the DJED will be based on that of the US dollar, which means that 1 DJED = 1 US dollar. Conversely, to resell DJED for ADA, users will need to trade their DJED for ADA.
According to the documentation provided by COTI, the DJED will also be secured thanks to a second cryptocurrency, the SHEN, which will serve as a reserve currency. A choice that aims to avoid possible sudden fluctuations in the price of ADA or to face possible massive DJED ticks that could cause a lack of ADA tokens in the smart contract.
SHEN holders, who will therefore participate in the DJED price safety mechanism, they will be rewarded via a liquidity pool system. To ensure this mechanism, SHEN holders will not be able to burn their tokens if the collateralization ratio is below the 400% threshold.
Conversely, if the collateralization ratio exceeds 800%, which is considered the maximum ratio by the smart contract, the latter will make buying SHEN impossible until the reserve returns to a healthier ratio.
In the end, SHEN holders will be rewarded in the form of COTI tokensfrom which it will derive commissions collected during the inherent processes of mint and of to burn SHEN and DJED tokens.
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