Topics Stablecoin
Bybit Learn
Bybit Learn
Intermediate
5 de ago de 2022

What Is DJED: The Algorithmic Stablecoin Backed By SHEN and ADA

The market of cryptocurrency is constantly growing. It is hard to keep up with what is happening in the world of digital currency.

The stablecoin ecosystem has significantly matured over the last few years. Blockchain participants use stablecoins for everyday transactions because they allow seamless money transfer, regardless of the location of the sender and recipient. Many investors are looking to invest, and they want to know the best choice.

DJED is a promising project that could become a leader in its field. According to some, DJED is currently the most advanced cryptocurrency in the crypto space as it ensures price stability through formal verification. The addition of DJED to the Cardano blockchain is expected to significantly improve the transaction settlement process.

Introduction

Today, there are over 10,000 cryptocurrencies available worldwide. More than 300 million people own cryptocurrencies, and over 200 crypto exchanges offer 6000 different types of cryptocurrencies.

The major announcement coming out of the 2021 Cardano Summit was the launch of a stablecoin named Djed. This stable coin is run transparently through the blockchain, where anyone can verify what is happening. A cryptocurrency tied to a stable asset is a stable coin, such as gold or the US dollar, and can simplify the exchange in a volatile market.

In this article, we'll talk about DJED, a new stablecoin, how it's different from other cryptocurrencies, and whether or not it is worth investing in.

What is COTI Network?

The COTI (Currency of The Internet) payment solution provides high transaction throughput with low transaction fees. Directed acyclic graph (DAG), similar to the IOTA network, is used to enable high-speed transactions. COTI will allow around 10,000 transactions per second, far more than VISA, which supports peak hour demand of 4,000 transactions per second.

Through a unique combination of distributed ledger technologies and traditional payment systems, COTI hopes to set up a next-generation decentralized payment system that is instant, secure, and cost-effective. Decentralization and scalability are two of the most pressing challenges in current blockchain technology that COTI addresses through its DAG model.

COTI stands out from other payment solutions by providing the following:

  1. A comprehensive solution that incorporates an innovative trust mechanism
  2. The decentralized mediation system
  3. Wallet with crypto and fiat currencies
  4. Native currency exchange.

How Does the COTI Network Work?

COTI enables merchants to accept payments quickly and at an affordable rate, directly through merchant-facing tools, without relying on financial intermediaries. The network is capable of processing 100,000 transactions per second, maintaining as much security and stability as traditional payment methods and blockchains. Furthermore, the platform utilizes the Trust Chain Algorithm to prevent user errors and fraud.

Scaling blockchain-based ledger protocols, like Bitcoin, Ethereum, or Litecoin, without consuming more energy is challenging. To solve the problem of scalability, COTI uses DAGs. COTI's DAG is called the Cluster, with each transaction represented by a Trust Score.

Adding a token transaction to COTI's ledger requires linking it to two prior transactions with the same Trust Score threshold. The Trust Score correlates with the confirmation time of the transaction. Users with a high Trust Score get faster confirmation and more transaction throughput.

Key features of COTI Network

In addition to meeting consumer payment needs and market demand, COTI offers a comprehensive solution that addresses merchant and consumer needs. The main features of COTI are:

DAG-based Distributed Ledger

With DAGs, similar to tree structures, you can store more data and validate more transactions efficiently and simultaneously. A higher network utilization results in more scalable networks. By using a DAG model, users get instant and fee-free transaction processing, i.e., there is no need to wait for one transaction to finish before starting another.

Proof-of-Trust

The COTI proof-of-trust algorithm, which combines the PoW and Trust Chain algorithms, provides a practical, energy-efficient alternative to the proof-of-work (PoW) algorithm. COTI uses DAG to solve the scalability problem by assigning Trust Scores to each network user. COTI intends to encourage good network behavior to reduce fees and raise service standards.

New transactions must link to the two previous ones, thus forming a chain called Trustchain. Using Trust Scores, the Trustchain algorithm determines the amount of proof-of-trust necessary to confirm a transaction. The system rewards users with a higher trust score with quicker confirmations.

Creation of Stablecoins

The COTI MultiDAG on top of the Trustchain produces fiat-collateralized, crypto-collateralized, non-collateralized, and other stable currencies. Companies can create their coins for trading on COTI's network. The companies can use dedicated coins to reward participants by offering coupons, discounts, etc.

MultiDAG and Smart Contracts

COTI MultiDAG and Ethereum are similar ecosystems. At the transaction layer, the ClusterID identifies one Cluster from another within the COTI MultiDAG. Each COTI MultiDAG cluster adheres to the same validation and KYC standards, creating a decentralized crypto world with a wide range of tokens.

COTI smart contracts are on-chain and decentralized, similar to Ethereum's smart contracts. Each step of smart execution is documented in a COTI MultiDAG cluster and validated by multiple full nodes before receiving confirmation. Since the DAG is a block-less network, there is no gas fee, and the COTI smart contract operates at a low cost.

COTI Pay

A COTI Pay account can process online and offline payments in crypto and fiat. It offers users the option of using credit cards and merchant-specific coinage. Additionally, users can earn interest on deposits and apply for business loans.

With the COTI Visa card, COTI Pay users can benefit from fast and secure payments, loyalty points, crypto-fiat purchases, and cashback rewards. Through COTI Pay, merchants can upgrade their payment infrastructure with less difficulty, eliminate intermediary costs, and expand their business opportunities.

What Is DJED Crypto?

Cryptocurrency volatility is a considerable obstacle to mass adoption. Since the value of cryptocurrency can fluctuate considerably in seconds, it is not suitable for everyday exchanges.

DJED stablecoin is the first to ensure price stabilization through formal verification. The term stablecoin refers to cryptocurrencies tied to fiat currencies such as the US dollar or Euro and commodities like gold and silver.

The Djed protocol is mathematically verifiable and does not require a bank like some other stablecoins. Due to the DJED algorithmic stablecoin contract, a smart contract is responsible for buying and selling DJED in the market to maintain a stable value.

Smart contracts ensure price stabilization, thereby making the coin useful for decentralized finance (DeFi). Thus, a smart contract will automatically issue more coins as the price increases. The smart contract buys more if the price falls, thereby helping push it back up. It keeps a reserve of base coins to ensure a stable price and minting and burning stablecoins and reserve coins.

What Is DJED Crypto Used For?

DJED stablecoins are suitable for many purposes such as payments, lending, payroll, settlements, alternate banking, remittances, etc.

Alternative Banking

As an alternative banking method, this is beneficial to underbanked businesses that are unable to open bank accounts, thus, allowing them to secure assets. Stablecoins give users complete control over their funds and prevent them from being affected by bank failures or limited bank hours.

Safe Haven Asset

The value of stablecoins is designed to be stable over time. Due to this feature, they are ideal safe-haven assets, unlike cryptocurrencies such as Bitcoin, whose prices fluctuate dramatically. People who use stablecoins to store value are not at the risk of losing their possessions, especially since they have complete authority over them.

Remittance

Overseas workers who wish to send money home face challenges with cross-border payments and remittances because international remittance fees are high. Solutions such as cryptocurrencies demonstrate the benefits of blockchain technology in remittance. Stablecoins, however, might reduce the cost even further due to their inherent price stability.

What Is SHEN Crypto?

SHEN is the reserve token with a unique mechanism that will maintain the algorithmic peg of DJED while providing an incentive to SHEN token holders in the long term.

By buying and selling SHEN, users are able to maintain the peg of DJED to USD while earning a share of transaction fees in the reserve pool. Since SHEN is a tradable asset, holders can also profit from the short-mid term price fluctuations as an added incentive.

DJED utilizes this reserve to charge and collect base fees, which will be pooled for transactions facilitated by the stablecoin. SHEN holders then get a share of this transaction pool as an incentive for their participation in maintaining the stablecoin peg ratio.

SHEN Reserve Ratio

SHEN has a minimum and maximum reserve ratio. This ratio turns off certain functions of the protocol when it is hit. When the reserve ratio hits its minimum level of 400% then the contract will prevent the removal of ADA funds from the contract by not allowing users to mint new DJED or burn SHEN. This helps to prevent peg manipulation of the stablecoin by only allowing users to either withdraw the underlying asset for DJED, or to add more liquidity to its reserves.

When the reserve ratio hits a maximum reserve ratio of 800%, the contract stops allowing SHEN to be minted until the ratio drops back below the threshold. This is created to help maintain incentives for Shen holders and not dilute the returns of each holder.

What are DJED and SHEN fees?

There are 3 different fee models with DJED. This includes minting fees, burning fees, operational fee, which are all charged in ADA.

The current fees are as follows:

DJED mint & burn fee: 1.5%

DJED operational fee: 0.5%

SHEN mint fee: 0.2%

SHEN burn fee: 0.5%

Users will have to pay a fee when minting and burning either DJED or SHEN. Both types of fees will be collected in ADA and sent to the reserve pool. Shen holders can redeem their rewards by burning their tokens.

On top of that, there will also be operational fees for minting and burning DJED (no operational fees for SHEN), which will also be paid in ADA and later converted into COTI before going into the COTI Treasury.

What is COTI treasury?

COTI treasury is a pool where users can deposit COTI and be rewarded for their participation. The treasury works as a staking pool and currently pay depositors a max APY of 84% based on the deposit multiplier and the lock period.

Users can top-up active deposits with additional COTI at any time. Deposits have an adjustable risk factor (e.g. 1x, 2x, 8x) and the lock period (e.g. unlocked, 30, 120 days). The Treasury charges a 0.5% fee for all deposits and withdrawals along with a transaction fee that consists of: network fee - 0.1% and node fee - 0.1%, which adds to a total of 0.7%.

As mentioned above, fees collection from burning and minting DJED in the future will be directed to this treasury and distributed to COTI stakers, potentially increasing the APY and incentivizing more users to join the treasury pool.

Djed vs. Cardano (DJED vs. ADA)

Curious about the difference between DJED and ADA? DJED is a stablecoin on the Cardano blockchain. They differ in several ways, such as the ledger type and their consensus mechanisms.

Ledger Type

While Cardano is a distributed ledger, DJED employs a DAG-based ledger. A distributed ledger is a database accessed by multiple people and synchronized across various locations, institutions, and geographies.

Consensus Mechanism

Cardano uses the proof-of-stake blockchain technology, while DJED uses COTI's proof-of-truth algorithm, a combination of the PoW and Trust chain algorithms.

Is DJED a Good Investment?

DJED is an algorithmic stablecoin protocol that acts as an autonomous bank to buy and sell stablecoins based on a price range set by a target price.

The DJED team consists of experts with decades of experience in the technology and cryptocurrency industry. Djed aims to offer various products and services to users, including a centralized exchange, a payment service, a debit card, and wallets.

To integrate DJED, COTI has partnered with various companies, including ADAX, Indigo, MeowSwap, DEX, and ErgoDEX. Using DJED as a currency is a low-risk investment opportunity and one that will help you achieve your financial goals.

How To Buy DJED

In the future, DJED will be able to accept 30 fiat currencies by partnering with AdaPay, and its access will be straightforward. The official website has not revealed any details related to the release date. According to COTI's latest blog on development updates, DJED is in the implementation phase and has already set up the infrastructure necessary to remain competitive among algorithmic stablecoins.

Closing Thoughts

Hundreds of cryptocurrencies exist today, and it can be a bit overwhelming to know which ones are worth investing in. Crypto space is a risky market to invest in, but it is possible to invest in crypto assets at a very low-risk level.

The DJED stablecoin ultimately provides a suitable example of this. DJED is an algorithmic stablecoin developed by Input-Output Hong Kong (developers of Cardano) and COTI Group. In the algorithmic design of DJED, smart contracts will maintain price stability, focusing on Decentralized Finance (DeFi) transactions.

Along with a mathematically verifiable protocol, it eliminates price volatility, requires no bank, and works as expected. These properties make it a highly marketable currency, which should see a growing number of users and investors as time goes on.

If you are currently looking for a new cryptocurrency to invest in, it is a great idea to research the different options and determine if a coin will be worth it. DJED is a great low-risk investment option.