Cardano Prepares For Assault On DeFi, Unveils New Stablecoin
August 19 2021 - 06:22PM
NEWSBTC
Cardano is close to its final Hard Fork Combinator (HFC) event
“Alonzo” to implement smart contract capabilities on the mainnet.
Developers, community projects, and IOG are preparing for the
milestone and the potential growth of the network’s ecosystem.
Recently, IOG released a paper describing a new algorithm
stablecoin to be launch on the platform, called Djed. The project
has been under development by IOG and partners Emurgo, and Ergo
blockchain, as a “stablecoin contract”, Cardano’s developer claimed
in an official post. This digital asset will tackle the most common
issues with other stablecoins, such as Tether and USD Coin, such as
lack of transparency about their reserves and its liquidity. Thus,
it will leverage a smart contract to guarantee the stability of its
price. IOG said: Djed is a crypto-backed algorithmic stablecoin
contract that acts as an autonomous bank. It operates by keeping a
reserve of base coins, and minting and burning stablecoins and
reserve coins. As seen below, this Cardano based stablecoin will
operate with an Autonomous “Central bank like” contract. Thus,
it’ll be comprised of reserve, equity, and liabilities. In
addition, Djed’s stability mechanism will allow the contract to
sell stablecoins, and use charging fees, and reserve assets to keep
a target price. IOG claims that holders will benefit from this
dynamic, as they will be able to boost the stablecoin reserve and
“assume the risk of price fluctuation”. But Djed is not limited to
being pegged to the dollar. It can work with other currencies, as
long as there are oracles providing the contract with the
corresponding pricing index. Cardano Stablecoin, Better Than The
Competion? The inventor of Cardano and IOG’s CEO Charles Hoskinson
celebrated the release of Djed’s paper. Additionally, Hoskinson
revealed that the Plutus team is currently working on a prototype
and will most likely be able after HFC Alonzo. As part of the ethos
of Cardano, IOG claims that Djed’s properties are “proven by
mathematical theorems”. This helps it achieve a constant peg to the
underlying assets with lower bound maintenance, resilience to
sudden spikes or drops in the market, no insolvency, no bank runs.
This mechanism will support a fair treatment of all users,
according to the official post. Thus, it creates more incentives
for holders to keep their coins with a limit in the Djed’s reserves
that can be “diluted” to issue more of it. Holders will
additionally benefit from the stablecoin’s increase equity_ (…) the
reserve surplus per reserve coin is guaranteed to increase as users
interact with the contract. Under these conditions, reserve coin
holders are guaranteed to profit. The Cardano based stablecoin will
be launch in two versions: the minimal Djed, a “simple and
intuitive” stablecoin, and the extended Djed. The latter will have
more stability benefits, IOG claims, and more incentives to
maintain the reserve ratio “at an optimal level”. The stablecoin
has already been implemented on Ethereum, as an ERC-20 token,
Binance Smart Chain, Avalanche, Polygon, and other ecosystem as a
tesnet project. At the of writing, Cardano (ADA) trades at $2.30
with a 8.5% rally in the daily chart.
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