The ultra-fast and simplified blockchain network IOST has collaborated with Cardano to launch an algorithmic stablecoin backed by cryptocurrencies. Since Terra’s stablecoins are backed by specific fiat currencies around the world, the recent collaboration between the two blockchains will focus on stablecoins backed by cryptocurrencies.
Both the blockchain teams have announced the release of a public testnet version of a decentralized algorithmic stablecoin ‘Djed’ that is built on Cardano. Through the testnet phase, Djed will pass a series of tests for major functionalities within the system without risking the actual funds.
According to the team of COTI (Currency Of The Internet), the stability of Djed will be maintained by Shen, an explicitly designed reserve coin. Shen guarantees the collateralization rate and the pegging of stablecoin. The development of Djed was started in September 2021 by Cardano. The newly launched stablecoin will be enforced on the entire Cardano network to pay transaction fees and other service-related charges.
Moreover, the IOST blockchain foundation has decided to enlarge in working capital and resources for the organization’s multi-chain ecosystem. Such increased inflow of financing will make sure that Djed possesses high annual interest rates with lower risks as compared to its existing competitors. However, the algorithmic stablecoin, according to IOST will solve some of the major underlying problems related to the stablecoins concept. The identified problems include:
- To detect the reliability of oracles price feeds
- Managing the scarcity for ensuring the price stability and dealing with deflationary costs,
- Modeling a short-term price arbitrage to reduce short-term price volatility and risks.