Cardano, the proof-of-stake blockchain network oft touted as Ethereum’s most serious competitor, plans to launch an algorithmic stablecoin in January 2023.
Project ‘Djed’, which is being developed in partnership with COTI, a DAG-based Layer 1 protocol, will use an algorithm that is backed by excess collateral through a cryptocurrency reserve.
Djed is set to launch on Cardano’s mainnet as early as January next year, so long as it passes an audit and a planned series of stress tests.
According to developers, Djed will be pegged to the US Dollar, backed by Cardano ($ADA), and use $SHEN as its reserve coin.
The stablecoin will be onboarded onto decentralised exchanges (DEXs) that will reward users for providing liquidity to Djed. Developers have said they plan to provide $ADA liquidity slowly and gradually to maintain the health of the stablecoin.
COTI CEO Shahaf Bar-Geffen, said at the Cardano Summit: “Recent market events have proven again that we need a safe haven from volatility, and Djed will serve as this safe haven in the Cardano network. Not only do we need a stablecoin, but we need one that is decentralised, and has on chain proof of reserves.”
Following the catastrophic collapse of the Terra ecosystem and its stablecoin, TerraUSD, in May, it was widely regarded that algorithmic stablecoins would fall out of fashion amongst blockchain developers.
Cardano, which at the time of publication is trading at £0.26 and the eighth largest cryptocurrency by market cap, has been bleeding from its all-time high price of £2.22 for 14 months now.
The network’s long-awaited Vasil upgrade launched in September this year, bringing improved scalability and transaction throughput speeds to the project, but Cardano’s ADA token saw little price rise as a result.
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