What’s With DJED?

Despite the fact that the market for algorithmic stablecoins has deviated ten times from the all-high, it didn’t stop the devs of Cardano from issuing their own stable called DJED. It appeared on January 31, 2023 and instantly attracted the attention of the crypto community. 

However, almost immediately DJED faced a couple of issues including the price, which recently dropped below $1. In this article, we will discover the story behind the stablecoin made by Cardano, and find out the possible reasons for the early price decrease.  

What is DJED

DJED is an overcollateralized ADA-backed stablecoin. It’s based on Cardano network and it works via storing a reserve of coins, minting and burning them. Initially, the protocol of Djed is mathematically verifiable. It doesn’t need any banks, likewise other stables. Thanks to its algorithmic stablecoin contract, the smart contract purchases and sells DJED coins in order to support the steady price. 

Talking about the application of DJED — it is made for various aims, such as payments, loans, other banking services, payroll, money transfers etc. 

The research paper of Djed is created by the IOG team and is powered by Coti. 

DJED roadmap

Djed has a roadmap — the team has highlighted the key milestones of the development available for every interested user. 

As we can see, Djed will have a few versions from 1.1.1. to 1.3. The first update includes the Vasil hard fork compatibility, rewards for the SHEN holders from the first day, and the audit of the code. 

Second update will use the Vasil hard fork and Plutus V2. The third version is going to have dynamic fees and costs and extensive delegating support. The plan is to add various coins as collateral, besides ADA. 

As the developers claim, Djed will also have an application called Djed Pay which will allow merchants and non-profit organizations to get DJED as a payment. 

What’s special about DJED?

Now let’s discuss the most important topic — what does DJED have to offer? Is there anything special about this stablecoin? Of course, every project that appears on the market has a list of unique features. So does the DJED. 

It’s claimed to be the 1st officially verified stablecoin protocol.The usage of the formal methodologies in the programming process has played an important role in Djed’s design and stability characteristics. With the aid of formal techniques, the properties are proved through the mathematical theorems:

DJED price fell below $1 — what happened? 

However, it’s not so smooth with the DJED lately. Almost right after the launch, the price of the stablecoin dropped below $1. We have asked the analyst of SimpleSwap about the possible reasons for such a drastic decrease.  

Djed’s short-term unpegging happened due to lack of liquidity. This deviation can be related to the formation of a new project of algorithmic stablecoin. 

The stablecoin DJED algorithm differs significantly with its approach to providing and implementing technology from the crashed stablecoin of the Terra blockchain, UST. Besides SHEN, the developers are planning to complete the list of collateral assets with BTC and ETH wrapped in the Cardano network in order to fix the peg to the dollar.  

DJED is already integrated into decentralized exchanges in the Cardano ecosystem, such as MuesliSwap, MinSwap, WingRiders and will be added to DeFi projects of this network. 

Also let’s not forget that popular USDT and USDC centralized stablecoin projects with fiat collateral and securities packages also have the possibility of short-term deviation from the U.S. dollar:

USDT:

USDC:

Conclusion

The DJED is a newborn stablecoin. This is the reason why many investors panicked when they saw a price drop. Time passes, the mechanism of collateral stabilizes, and the price of the stablecoin goes back to $1. Such a drop shouldn’t be considered a huge anomaly, and those who bought DJED better be patient and wait till it stabilizes. 

DJED is repeating the behavior of other popular stables like USDC and USDT and this should be taken into consideration. All we need to do is stay calm and watch how DJED price gets back to normal.  

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.