COTI CEO differentiates Djed as overcollateralized stablecoin

Shahaf Bar-Geffen, the CEO of COTI, said Djed is an overcollateralized stablecoin and not an algorithmic stablecoin.

During COTI’s archetypal update of 2023, Bar-Geffen took the accidental to marque wide that the soon-to-be-launched Djed stablecoin is to beryllium referred to arsenic an overcollateralized stablecoin, contempt it operating connected an algorithmic design.

How does Djed work?

Algorithmic stablecoins usage an automated oregon sometimes incentivized method to execute terms stability.

In instances of the terms being supra the peg price, tokens are minted to summation circulation and trim the price. While pricing beneath the peg terms requires burning tokens to trim circulation.

Djed is backed by Cardano’s ADA token, meaning users wanting the stablecoin nonstop ADA to the astute declaration and person minted Djed successful return. These transactions physique up the worth and holdings successful the Djed pool.

By contrast, selling Djed requires users to nonstop the stablecoin backmost to the astute contract, which past burns the token and returns the magnitude of ADA equivalent connected a $1:$1 basis.

To accommodate instances of ADA terms fluctuation and the anticipation of insufficient ADA successful the astute declaration to wage Djed sellers, COTI has incorporated the Shen reserve coin, which acts arsenic liquidity to support the peg ratio.

Overcollateralized stablecoins person advantages, says Bar-Geffen

Despite a wide content that differences betwixt overcollateralized and algorithmic stablecoins are a substance of semantics, Bar-Geffen thinks it is important to categorize Djed arsenic the former.

The COTI CEO said Djed evidently uses an algorithm, but utilizing an algorithm to support terms stableness is not needfully a crushed to categorize it arsenic such.

In listing the differences betwixt overcollateralized and algorithmic stablecoins, Bar-Geffen said Djed uses outer collateral successful ADA, which is unconnected to the protocol. In comparison, algorithmic stablecoins usage interior collateral.

Four times the magnitude of ADA overcollateralizes Djed astatine a minimum. In contrast, algorithmic stablecoins thin to beryllium partially collateralized. Likewise, Djed is ever redeemable for ADA, portion algorithmic stablecoin redemption sometimes “depends connected the worth of the governance token.”

“Djed’s stableness depends connected overcollateralization and not connected the spot successful the governance token.”

Summing up, Bar-Geffen said Djed does not endure the centralization and regulatory hazard of fiat-backed stablecoins. Similarly, Djed is advantageous implicit algorithmic models successful that nary spot successful the algorithmic exemplary oregon governance token terms is required.

The Djed 1.1.1 nationalist testnet has been moving since Dec. 6, 2022, with idiosyncratic feedback helping devs fine-tune the product. The last rollout is expected sometime successful January.

The station COTI CEO differentiates Djed arsenic overcollateralized stablecoin appeared archetypal connected CryptoSlate.