Just like any other algorithmic stablecoin, Djed operates by keeping a reserve of base coins, and minting and burning stablecoins and reserve tokens. The reserve Shen token will act as a buffer, effectively maintaining Djed's $1 price.
The plan to build algorithmic stablecoin was first announced by Cardano founder Charles Hoskinson in July last year. The official Djed issuer is a payment solutions firm COTI, known for its long relationship with Cardano. As the service provider, COTI will collect fees on both minting and burning Djed and Shen. The company believes that algorithmic stablecoins are “a killer app” with a potential for wide adoption.
“Djed isn’t just a stablecoin built upon Cardano’s chain, it is also designed to become the ultimate coin with which Cardano’s entire network transaction fees will be paid. It makes more sense for a chain to have predictability in how much transaction costs, rather than have volatile gas fees, and Djed will do just that,” the COTI announcement reads.
Currently, Djed is being tested through the test pools on Cardano DEXes SundaeSwap, Minswap, and WingRiders. The mainnet launch is expected sometime in Q3 2022, although no exact date is known yet.