Cardano’s Stablecoin DJED – an Important Addition to the Ecosystem

The Cardano (ADA) ecosystem now includes a native stablecoin. DJED is live and raises hopes that Cardano will gain market share not only in the Decentralized Finance (DeFi) space.

Literally, at the last minute, the launch of the stablecoin DJED in the Cardano ecosystem (ADA), announced for January, still worked out. On the last day of the month, the team behind DJED announced the “beginning of a new era” via a blog post.

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DJED is the responsibility of COTI, a crypto company specializing in financial services

According to its website, around $10 million in the capital is already gathering behind DJED on day one, which will enable the issuance of 1.7 million DJED. As a stablecoin, DJED is supposed to mirror the U.S. dollar 1:1 and derive its stability from a significant over-collateralization. A two-tiered concept takes effect: Cardano (ADA) is the number one cover and the reserves in ADA should exceed the value of the issued DJED by at least 400 percent. If the price of ADA falls drastically and the stability of DJED would be in danger, another new token called SHEN would be the second cover. SHEN can also be purchased for Cardano and is intended to provide bonuses in normal times as a ready reserve for DJED.

The principle of DJED was initially described as an “algorithmic stablecoin,” which brought back unpleasant memories of Terra UST. The Terra (LUNA) backed algorithmic stablecoin UST had first faltered in May 2022, then crashed, taking the entire ecosystem with it. This is another reason why COTI now refers to DJED as an “over-hedged stablecoin.” Cardano currently has a market capitalization of just over $13 billion.

At launch, DJED will be traded on several decentralized crypto exchanges such as MinSwap, with centralized crypto exchange Bitrue set to join on Wednesday, February 1st. DJED’s launch also provided a boost to Cardano’s price curve, which gained about 6 percent in the last 24 hours, outpacing general market trends. DefiLlama data shows a significant increase in Decentralized Finance (DeFi) capital inflows under Cardano, also due to new options through DJED.

Conclusion: stablecoin DJED should prove its worth under Cardano

The coming months and weeks will have to prove whether DJED’s concept will work out. The experiences from the disaster with Terra UST have been incorporated into DJED and have produced the two hedging layers. But they will probably not be tested under real conditions until DJED’s market capitalization rises significantly. For the time being, Cardano can be happy to have an important piece of the puzzle in the ADA ecosystem with the stablecoin.

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(Featured image by Michael Förtsch via Unsplash)

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First published in BLOCK-BUILDERS.DE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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