COTI, a software development company, announced the issuance of the first stablecoin designed to run on Cardano a few hours ago.
The announcement was made at the Cardano Summit stage in Laramie, Wyoming, by Cardano leader Charles Hoskinson and COTI Group CEO Shahaf Bar-Geffen.
The Djed stablecoin will be issued on Cardano and will help to grow the blockchain’s nascent ecosystem, especially now that the blockchain is beginning to support smart contracts and markets are excited about the potential development of DeFi platforms on a blockchain that has been dubbed the “Future Ethereum Killer.”
What exactly is Djed, and why does Cardano require a stablecoin?
A stablecoin is a cryptocurrency that is designed to keep its value stable in relation to a reference. The most well-known stablecoins are cryptocurrencies such as USDT and Stasis, which are linked to fiat currencies such as the US dollar or the Euro. There are, however, cryptocurrencies whose value is pegged 1:1 to other commodities such as gold (such as Digix) or even to other cryptocurrencies or cryptocurrency baskets.
There are several ways to achieve this relationship, some of which are more effective than others. The most common is the holding or blocking of a portion of the reference asset, which allows for the issuance of a proportional portion of the correspondent stablecoin: The market capitalization of USDC, for example, 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.
In the case of Djed, the value is kept stable by an algorithmic design that makes use of smart contract design on the Cardano blockchain to keep the price as close to $1 as possible. To accomplish this, Djed keeps a reserve of base coins while mining and burning other stable assets and reserve coins to compensate for fluctuations.
According to the whitepaper, there will be two versions of Djed: a minimal one designed primarily 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 the DeFi protoco.
A Positive Development
COTI Group CEO Shahaf Bar-Geffen stated at the conference that the use of a stablecoin like Djed will allow users to maintain greater control over their transactions due to its stable value and low fees.
Stablecoins are used by blockchain participants 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 the platform’s transaction settlement.
Charles Hoskinson, for one, was excited about this new project because it would be one of the most ambitious implementations aimed at strengthening the Cardano ecosystem.
The Djed stablecoin has the potential to be a game changer in the cryptocurrency space, appealing to a completely new audience at a time when the industry is already experiencing exponential growth. COTI has been a Cardano ecosystem partner for a long time. It’s fantastic that they’re on board with this new venture.
This appears to be a significant step for COTI. COTI’s token increased by 50% when its partnership with Cardano was first announced, reaching an all-time high (ATH) of $0.60 in a matter of hours.