Milkomeda team said it was going to make testnet version of Djed available
According to a recent announcement from Milkomeda team, Cardano users could soon test Djed stablecoin on the Milkomeda testnet. The team said it will make a testnet version of Djed available on the Milkomeda testnet, allowing users to explore the algorithmic stablecoin. Milkomeda is a sidechain compatible with the Ethereum Virtual Machine (EVM), allowing developers to achieve cross-chain interoperability between Cardano and Ethereum.
The Milkomeda Foundation announced the release of C1, an Ethereum Virtual Machine-compatible sidechain that is directly connected to the Cardano blockchain, in late March. This allows assets to be transferred between the two blockchains, allowing popular Ethereum-based decentralized apps (dApps) to be run on top of Cardano using wrapped smart contract technology.
Stablecoin Djed
Djed, an algorithmic crypto stablecoin that operates as a standalone bank, launched on testnet on May 4. Djed is an over-collateralized algorithmic stablecoin developed by Cardano’s IOG and issued by COTI. It uses SHEN as a spare and is backed by ADA.
To ensure that there is enough ADA in the pool, Djed’s algorithm uses a collateral ratio of 400-800% for Djed and SHEN. This indicates that there is $3-7 worth of ADA in the reserve pool for every 1 Djed minted. The 400-800% ratio is thought to provide a sufficient buffer to absorb ADA’s volatility.
The backup coin, SHEN, compensates for ADA price fluctuations by covering shortfalls and guaranteeing the collateralization rate. Users must interact with a smart contract by sending ADA to its address to mint the Djed stablecoin. The Djed will then be returned to the user via the smart contract.
In a blog post, the COTI team describes how Djed differs from UST: “Although DJED and UST are both algorithmic stablecoins, only DJED is over-collateralized (up to 8X), which reduces its chance of getting depegged, while averting a death spiral by blocking coin burning and minting.”
