This post is a concise review of Djed, the newly launched Cardano stablecoin.

The collapse of Terra Luna (UST) made crypto enthusiasts lose interest in stablecoins that are backed by other cryptocurrencies.

If you recall, investors recorded massive losses and shed well-filling tears on Twitter. 

Despite this negative incident that marked the sands of time in crypto, Cardano (ADA) went ahead to launch an over-collateralized stablecoin, which has a similar mechanism as Terra’s UST.

What were Cardano developers thinking? And what good can possibly come out of this new coin?

Keep reading for more details.

[Algorithmic Stablecoins – This Is Why They Keep Losing Their 1:1 Dollar Peg]

What Is Djed?

Djed (pronounced “Jed”) is a community-driven Cardano-backed stablecoin.

It is a product of COTI, a DeFi platform optimized for creating price-stable coins. Interestingly, COTI is also hosted on the Cardano blockchain. 

Since the first time it was announced, Djed has been one of the anticipated news in the crypto market.

ADA investors, in particular, have been on the lookout as they believe the stablecoin is a catalyst for ADA’s price growth.

Finally, Djed launched on January 31, 2023. Cardano network developers assured the community that the stablecoin had completed a successful security audit and development testing for over a year.

It was created to improve liquidity in the Cardano ecosystem as it is traded across exchanges.

How Is Djed Backed?

Again, Djed is termed Cardano’s native over-collateralized stablecoin. 

An over-collateralized stablecoin has a large number of cryptocurrency tokens maintained as a reserve for issuing a lower number of stablecoins.

Djed is pegged to the United States dollar and backed by Cardano’s native cryptocurrency, ADA. 

Also, ADA uses Shen (SHEN) token as its reserve coin. Shen is simply a wallet holding a large number of ADA tokens.

To ensure its stability, the new stablecoin uses a collateral ratio between 400% and 800%.

This means that for every 100 Djed, there are about 400 – 800 ADA in the reserve. Or, put simply, $1 Djed is backed by $4 – $8 worth of ADA.

The goal is to make sure that no matter how volatile the market is, the stablecoin will never lose its 1:1 dollar peg.

What Lies Ahead for Djed?

Firstly, different Cardano platforms like Djed.xyz, MinSwap, Wingriders, and MuesliSwap have listed the stablecoin. Also, Bitrue, a centralized exchange, has listed Djed.

NB: Djed.xyz is the protocol where you can mint/burn Djed for ADA.

Additionally, Cardano developers have acquired more than 40 partnerships to facilitate the utilization and adoption of Djed.

In the coming months, Djed will go through two other versions of upgrades:

• Version 1.2 – will use the Vasil features including a reference script to enhance the token’s scalability. 
• Djed 1.3 – will introduce dynamic fees and prices and allow for a more advanced delegation program and ultimately significant liquidity provision.

Furthermore, wrapped assets like wrapped BTC (WBTC) and wrapped ETH (WETH) will be added as collateral to mint Djed.

Has Djed Improved the Price of Cardano (ADA)?

ADA is currently trading at $0.4057, which represents a 9% increase in price since the launch of Djed.

While this may make investors happy, this pump is not tied to the stablecoin alone.

Earlier in January, co-founder Charles Hoskinson announced that Cardano would expand via custom-built sidechains.

This has helped the network grow in ecosystems, and the native token ADA has been a beneficiary.

ADA has surged by over 50% in the past 30 days while obtaining the 8th position in the highest cryptocurrency by market capitalization.

There is also the impact of the bullish trend in the general crypto market. And we don’t know how long the price pump on ADA will last.

But what really bugs me about this token is how it has remained under $1 despite its amazing fundamentals. Have you ever thought about it?

Is Djed a Good Investment?

I can’t say for sure because I feel like its uses are limited to providing liquidity to the Cardano ecosystem. 

As a result, other members of the crypto community may drag their feet to invest in the stablecoin.

Hopefully, the partnerships garnered so far may help solve this problem.

Additionally, over-collateralization is not enough to determine a bright future for Djed.

Besides, it is backed by only ADA, a coin worth less than $1 per unit. Hmm…

Anyway, the plan to add wrapped tokens as collateral may tackle this issue.

Nevertheless, I wouldn’t recommend Djed.

But don’t take my word for it, MoneyZG shared noteworthy insights about Djed in this video. You may want to check it out before making your decision.

Before you go, I’d love to know your thoughts on this stablecoin. Please drop them in the comments section right away.