The launch of nonsynthetic stablecoins on the Cardano (ADA) network has been highly anticipated by ADA holders. According to COTI, the company collaborating in the development of the stablecoin on the ADA blockchain, Djed stablecoin is expected to launch in the coming week.
The COTI team has announced that the final step prior to the launch of the Djed stablecoin is the synchronization of the chain index. This process, which began approximately one week ago, is expected to take about 14 days to complete. Based on this information, it is likely that Djed will be launched on Feb. 1, 2023.
ADA holders are closely monitoring the development of the Djed stablecoin as it has the potential to significantly contribute to the growth of the Cardano ecosystem and, moreover, to making the Ethereum (ETH) competitor gain more visibility in decentralized finance (DeFi). After all, stablecoins are widely used as a means to facilitate the entry and exit of investors onto the cryptocurrency market.
But what is Djed?
Djed is an overcollateralized stablecoin, an asset that has extra collateral in addition to the value of the issued stablecoin. Overcollateralization means that instead of only needing to deposit the equivalent value you want to obtain, you need to deposit a higher amount of assets to ensure the stability of the stablecoin.
To ensure its parity with the U.S. dollar, in addition to leveraging Cardano’s smart contract design, Djed will be backed by other tokens and have collateral of more than 400% of the requested value before being issued to a user. This is one of the measures taken to ensure that the stablecoin does not repeat the steps taken by TerraUSD in 2022.
Djed will utilize a reserve of base currencies and a process of mining and burning other stable assets and reserve currencies to manage value fluctuations. With the stablecoin smart contract, the promise is that you can exchange ADA for Djed, facilitated by the presence of a third token called SHEN, which acts as a mechanism to maintain the stability of the asset’s price.
An important aspect to note is that Coti has announced that the Djed stablecoin will be able to serve as the primary currency for paying all transaction fees on the Cardano network. This feature may improve the usability of Djed and increase its demand.
Is ADA going to the moon?
It is challenging to predict the exact impact that the launch of Djed will have on the price of ADA. However, it is common for major events such as this to be reflected in the asset’s price before they occur, and for the price to correct soon after the event takes place.
This trend has been observed on many major blockchain assets, and it is likely that Cardano will follow a similar pattern. In the past, the Shelley, Alonzo and Vasil updates also had this effect on the price of ADA.
Of course, the cryptocurrency may also not repeat its past and experience appreciation, but investors should not count on Djed being a factor that will take ADA to $1 again, at least not in the short term. With the press keeping a close eye on the big launch, the arrival of the stable asset on Cardano should have been priced in some time ago.