Among the many announcements to come out of the Cardano Summit 2021 was more information on the first stablecoin coming to the Cardano blockchain. It will be named ‘Djed’, after the pillar-like structure in Ancient Egyptian hieroglyphs that represented stability. Djed will be issued by COTI, a decentralised payment platform that already acts as a payment platform for Cardano’s ADA pay.
Djed will be based on an algorithmic design that will make use of smart contracts to ensure price stability. The peg of the stablecoin will be maintained through minting and burning of Djed, executed by smart contracts, using funds from the reserve.
This design differs from the traditional stablecoins such as Tether (USDT) which are backed by a 1:1 ratio of fiat currency. This can lead to issues when not enough of the reserve is held in cash and can lead to fluctuations in the peg. Tether experienced this exact issue back in 2017 which resulted in 1 USDT dropping to as low as $0.92 in value.
Djed aims to become the coin that transaction fees are settled in across the entire Cardano blockchain. The vision is that it will be better to settle transaction fees in a stablecoin as opposed to ADA which can fluctuate much more in price, leading to more volatile transaction fees.
As the issuer of Djed, COTI will collect the fees on both the minting and burning of Djed and of the reserve coin. They plan to convert these fees into $COTI coins by directly buying them in the market and supporting demand for $COTI. These $COTI coins will then be deposited in COTI’s treasury for the benefit of the treasury users. If all this goes to plan it could lead to an explosion of growth in the COTI ecosystem.
$COTI is currently trading at $0.55 with a market capitalization of $477,649,958. This is up 90% from $0.29 before the announcement at the Cardano Summit 2021.
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