Djed will be used on the Cardano network to avoid volatile and exorbitant transaction fees and empower the network DeFi ecosystem.
Djed Will Power the Cardano Ecosystem.
At the Cardano Summit, on Sunday, blockchain payments processor COTI and Cardano announced a partnership, wherein COTI will be the official issuer of the new stablecoin Djed on the Cardano network.
Its research paper defines that its “stablecoin protocol behaves like an autonomous bank that buys and sells stablecoins for a price in a range that is pegged to a target price. It is crypto-backed in the sense that the bank keeps a volatile cryptocurrency in its reserve”
It is designed to be used for paying transaction fees on the Cardano network, making the transaction costs predictable and avoiding volatility.
“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. Djed shares our commitment to formal verification, proving a robust method of combating price volatility of crypto markets.”Charles Hoskinson, Founder of Cardano
What is Djed? How Does it Maintain Stability?
Stablecoins are a form of cryptocurrencies whose value has very little volatility like fiat currencies. They maintain their stability by pegging to an underlying currency/asset or through algorithms.
Djed is a stablecoin backed by crypto whose stability is maintained by 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.
It operates by keeping a reserve of base coins, and minting and burning stablecoins and reserve coins.
The Djed stablecoin is pegged to a fiat currency (USD), along with a governing algorithm. This approach provides a stable means of exchange. But it is not limited to being pegged to only the USD. It can work with other currencies too, “as long as there are oracles providing the contract with the corresponding pricing index.”
It will be issued in 2 variants, Minimal Djed and Extended Djed.
- Minimal Djed: “this version is designed to be as simple, intuitive, and straightforward as possible, without compromising stability.”
- Extended Djed: “this more complex version provides some additional stability benefits. The main differences are the use of a continuous pricing model and dynamic fees to further incentivize the maintenance of the reserve ratio at an optimal level.”
Shahaf Bar-Geffen, Chief Executive of COTI Group, said on the occasion, “The stablecoin ecosystem has matured tremendously over the past few years. 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.”
Stablecoins are important in DeFi especially for trading, cross-border transfers, lending, and providing predictability in gas fees. Djed might make Cardano more lucrative and favorable to transact for both investors and DApps.
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