On January 25, the COTI Network announced that DJED, Cardano's stablecoin, is scheduled to launch next week. The exact date of the release has not been revealed yet. Considering the previous blog posts, February 1 is a likely date for the rollout.
DJED is jointly developed by Layer 1 blockchain COTI and Input Output Global, a technology company behind the Cardano blockchain. DJED will be collateralized by ADA, the native cryptocurrency of Cardano. A stablecoin smart contract will mint DJED in exchange for ADA and will also rely on SHEN reserve coin, which will act as a buffer, effectively absorbing the volatility of ADA.
According to COTI, DJED requires 400% to 800% collateral to be posted before a smart contract issues it to a user. Basically, it means that "it has 4 to 8 times more underlying value backing it, than the total sum of DJED minted," the team explained.
Both DJED and SHEN are names coming from the mythology of Ancient Egypt. As the COTI team explained in a blog post, "Djed is an ancient Egyptian symbol that represents stability - it is also known as ‘The Backbone of Osiris,’ which also means strength and stability."
“Continuing with the ancient Egyptian theme, we picked Shen as the name for Djed’s Reserve Coin. The Shen is a symbol of both royalty and symmetry. It has a deep connection with infinity, eternity, protection, and completeness given its circularity,” the blog post read.
Stablecoins track the price of fiat currencies, used as their collaterals, which allows them to maintain relatively low volatility. This type of cryptocurrency acts like a bridge between the DeFi infrastructure and a conventional financial system. It gives more flexibility to investors who can quickly switch to fiat currencies during periods of instability and help individuals to conduct money transactions and get loans without access to banking services.
Read also: The ultimate 101 guide to stablecoins
What is COTI?
COTI is a layer 1 blockchain infrastructure that uses an innovative consensus algorithm known as PoT or Proof of Trust.
The PoT mechanism adopted by the COTI Network was designed to make the platform more resilient to malicious acts, particularly Sybil attacks. To achieve this, the network uses the nodes with the highest reputation to validate transactions. A node's reputation can be understood as its trustworthiness. It is influenced by several factors, including the number of other nodes that trust it and its past behavior on the network. In addition, the amount of stake is also taken into account, similar to the Proof of Stake (PoS) mechanism.
This consensus mechanism requires a different blockchain architecture, which looks more like a web than a traditional chain of blocks. This structure is known as DAG or Directed Acyclic Graph.
ADA's price development
ADA experienced a price increase for three days starting on January 19. In the meantime, on January 21, Cardano faced a serious anomaly, which led to the disconnection of almost 60% of the network nodes. Despite this event, the price of ADA reached its recent high of $0.3766 the next day.
Yet, ADA's price started to decline on Monday and quickly reached the level of $0.3587. Despite the bullish news about the upcoming launch of DJED, ADA’s price is down 4.75% in the past 24 hours, in line with a broader market drop. At press time, ADA is trading at $0.3561.