COTI Will Launch The First Algorithmic Stablecoin ‘Djed’ On Cardano

Much anticipated Cardano’s first Stablecoin “Djed” is coming soon, allowing cheaper transactions and making it easier to run DeFi projects.

Software development company COTI announced a few hours ago the issuance of the first stablecoin designed to run on Cardano.

The news was announced at the Cardano Summit 2021 by Charles Hoskinson, the creator of Cardano, and Shahaf Bar-Geffen, CEO of COTI Group.

Djed is based on an algorithmic design that uses smart contracts to ensure price stability. Smart contract programming is also used to ensure that the stablecoin will work effectively for decentralized finance (DeFi) transactions. 

What Are Stablecoins?

A stablecoin is a cryptocurrency designed to maintain a stable value compared to another asset. The best-known stablecoins are cryptocurrencies like USDT or Stasis, which are pegged to fiat currencies such as the dollar or the Euro. However, there are cryptocurrencies whose value is pegged 1:1 to other commodities such as gold (like Digix) or even to other cryptocurrencies or baskets of cryptocurrencies.

There are many ways to achieve this, 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 correspondent stablecoin: For example, the market capitalization of USDC is $3,677,063,935 because there are 3,677,063,935 USDC tokens in circulation and Circle holds $3,677,063,935 in collateral.

How Djed Works?

In regards to Djed, the value is kept stable by an algorithmic design, which leverages smart contract design on the Cardano blockchain to maintain a price as close as possible to $1. Djed maintains a reserve of base coins while mining and burning other stable assets and reserve coins to counter fluctuations.

The whitepaper explains that 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 fees to react faster to external events, ensure an optimal level of reserves and provide even more security when performing complex operations such as those performed in DeFi protocol transactions.

The CEO of COTI Group, Shahaf Bar-Geffen, said that the use of a stablecoin such as 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 everyday transactions because they allow monetary value to be exchanged in a seamless manner, regardless of the sender and recipient’s location. I believe that adding the Djed stablecoin to the Cardano blockchain will significantly improve how transactions are settled on the platform.”

Hoskinson was excited about the new project as it would be one of the most ambitious implementations aimed at strengthening the Cardano ecosystem.

“The Djed stablecoin could be a game-changer in the crypto space, appealing to an entirely new audience at a time when the industry is already experiencing astronomical growth. COTI has been a long-time partner of the Cardano ecosystem. It’s great to have them on board with this new venture.”

When its partnership with Cardano was first announced, COTI’s token spiked 50%, hitting an all-time high (ATH) of $0.60 in a couple of hours. At the time of writing COTI trades at $0.52.