Cardano management has unveiled DJED, a new stablecoin that will arrive in the ecosystem next 2023. Cardano has also presented a new payment application.
Last November 21, the Cardano Summit 2022, a conference held by the Cardano Foundation, focused on the network itself. During the event, different personalities from the foundation took the stage to talk about the network's performance in 2022. Still, the new implementations being prepared for the ecosystem to have undoubtedly been the most exciting point.
Shahaf Bar-Geffen, CEO of COTI, accessed the event as a guest and asked a key question "Do we want a stable currency in Cardano?". The answer to this question takes the form of the new Cardano stablecoin, named DJED.
DJED has been revealed as the first algorithmic stablecoin to arrive on the Cardano network. The stablecoin will be backed by ADA and SHEN, a reserve asset that will be a backstop for the coin to maintain its 1-to-1 parity with the U.S. dollar. According to the developers, the asset successfully passed its latest audit and is set to launch to the public next January 2023.
How does DJED operate?
DJED's operation is simple; like any algorithmic stablecoin, the interested user can send ADA to a Smart Contract address on the Cardano network. The network will convert the value of the ADA sent to DJED, and the asset can then be converted back to ADA and the tokens retrieved.
SHEN will be a reserve token to ensure parity with the DJED dollar. Loss of parity may occur due to fluctuations in the digital asset market, which may affect the value of ADA. According to management, SHED reserves allow for a 400-800% guarantee rate. SHED will fluctuate in the free market, and token owners will get dividends every time they exchange DJED or SHEN for ADA.
Shahaf Bar-Geffen highlighted implementing a "Proof of Reserve" system for DJED, which allows verification of the token's financial management, already a standard procedure in the industry. Still, after the events with the FTX exchange, the need for transparency within the digital asset ecosystem is almost a must. Proof of reserves reveals the management of the resources themselves, revealing the exact amount and proportion of the distribution of an asset's funds.
The Cardano Foundation used the presentation to unveil DJED Pay, which will launch with the asset next January 2023. DJED Pay is a mobile application that allows users to receive the DEJED token as a payment method. This method makes it possible to make payments with the asset in a much more user-friendly way for Cardano network users.
What is the purpose of the Cardano stablecoin?
Cardano's reach in recent years has positioned it as one of the most solid projects today. Still, the crypto market volatility prevents users from taking full advantage of the global nature of Cardano's services as a means of payment, store of value, or money exchange.
Creating a stablecoin anchored to the dollar will generate the necessary investor confidence. It will enable the creation of new financial opportunities in the Cardano ecosystem; this will serve as a backing for a stablecoin that will help reduce the uncertainty around stable algorithmic currencies, especially after the collapse of TerraUSD in May.
Conclusion
Therefore, creating a stablecoin backed by the dollar reserve will help build confidence in Cardano investors and enable stable financial offerings for ADA holders. In addition, this stablecoin will help reduce uncertainty around algorithmic stablecoins, especially after the recent events of FTX and Terra.