Milkomeda Djed Osiris

Summary

Milkomeda Djed Osiris Dollar (MOD) is the newest Djed-based stablecoin.
It brings reliable, formally verified, empirically battle-tested, peer-reviewed, immutable, governance-free, censorship-resistant, decentralized stability to Milkomeda and, by extension, to Cardano.
It is backed by mADA and pegged to USD.
Its development was a wide community effort that included the original team that conceived the Djed stablecoin protocol.
Its development was supported by a Catalyst grant.
Support this project further by voting on this Catalyst proposal.

What is Milkomeda Djed Osiris?

Milkomeda Djed Osiris is the latest deployment of a Djed-based stablecoin protocol and the first deployment of an implementation of Djed in the Solidity smart contract programming language, bringing a reliable, formally verified, empirically battle-tested, peer-reviewd, censorship resistant, bridge-free, immutable, governance-free and truly decentralized (autonomous, self-operating), ADA-backed, USD-pegged stablecoin to Cardano's EVM side-chain.

Stablecoins are digital assets that have mechanisms to maintain a low deviation of their price from a target price. Stability is a key characteristic for an asset to be a currency and be able to properly perform the various functions of money, including serving as a unit of account, store of value and means of exchange. For this reason, stablecoins have emerged as a critical component for decentralized finance.

The Djed Stablecoin Protocols

Djed stablecoins differ from other stablecoins in several ways. For instance, unlike fiat-backed stablecoins, Djed stablecoins are crypto-backed and thus are not susceptible to risks associated with entities managing fiat currency reserves, such as insolvency of the banks where the fiat reserves are kept or potential losses associated with investment of the reserves. And, in contrast to other algorithmic stablecoin protocols, the Djed protocol has been formally verified. This means that mathematical theorems have been proven, clearly showing under which assumptions the stablecoins remain pegged, and the proofs have been checked using the interactive theorem prover Isabelle and the bounded model checker Lustre. A version of the technical white paper was thoroughly peer-reviewed and accepted in the 5th IEEE International Conference on Blockchain and Cryptocurrency in 2023. Beyond theory, the Djed stablecoin protocol has been empirically battle-tested on Ergo since Q1 2021, where SigmaUSD (https://sigmausd.io) has endured several market crashes without losing its stability.

What is special about Milkomeda Djed Osiris?

Milkomeda Djed Osiris is based on version O (Osiris) of the protocol, which builds upon the experience gathered with the successful previous deployment of SigmaUSD on Ergo. The main distinguishing feature of Osiris is that it allows reservecoins and stablecoins to be simultaneously sold back to the Djed contract independently of the reserve ratio, provided that the sale does not reduce the reserve ratio. This improves the experience for reservecoin holders, who are now able to sell back their reservecoins even when the reserve ratio is below the minimum threshold. Another distinction is a transaction limit, to reduce the wholesale discount effect and reserve drainage in case of oracle delays. To further prevent oracle delays, this deployment relies on an oracle managed by Milkomeda’s nodes, which checks prices every 10 seconds and posts a new price to the blockchain if the new price is different from the previously posted price by more than 1%.

Furthermore, this is the first deployment of Djed that is fully autonomous. By virtue of being immutable and zero-governance, no one is able to change the rules or even the parameters of the deployment. To ensure that the immutable code behaves according to the protocol’s specification, the code underwent numerous refactorings, extensive testing, testnet deployments and a thorough smart contract audit by Peckshield. It has also been battle-tested for 5 months.

Most importantly, the source code is available at Github, so that all users can do their own research and decide for themselves whether they want to trust the rules implemented in the contract, instead of having to trust operators, auditors, development teams… Transparency matters.

To ensure the highest degree of robustness and censorship resistance, not only the smart contracts run fully autonomously and free from any potentially failing centralized operators, but also the user interface of Milkomeda Djed Osiris has been deployed to IPFS (the Inter-Planetary File System) and has been made open-source, so that, if necessary, people can run it locally in their own computers or even re-deploy it for others to use it. Therefore, even if the user interface became unavailable for any reason, people will always be able to interact directly with the contract through other means. Unstoppability matters.

Furthermore, the Milkomeda Djed Osiris Dollar is the only native stablecoin on Cardano's sidechain Milkomeda. All other stablecoins on Milkomeda are bridged and their users face significant risks of bridge hacks. Users have lost over $2.5 billion in the last two years due to bridge hacks. For users who would like to use stablecoins with zero bridge-risk on Milkomeda, the Djed Osiris Dollar remains the only option.

To reduce friction for Cardano users and improve their user experience, Milkomeda's wrapped smart contract functionality has been integrated into the user interface of Milkomeda Djed Osiris and is in the final stages of testing before release. This will allow users to interact with the smart contact of Milkomeda Djed Osiris directly with their Cardano wallets and ADA, without having to first convert ADA to mADA and use an EVM-compatible wallet.

Milkomeda Djed Osiris Dollar (MOD) and its corresponding reservecoin (MOR) are available in two of Milkomeda's main DEXes – OccamX (https://occamx.fi/) and Blueshift (https://app.blueshift.fi/) – where users can be rewarded for liquidity provision.

What is the history of Milkomeda Djed Osiris?

Milkomeda Djed Osiris is the outcome of a productive collaboration between Vacuum Labs, Bloxico, AOSSIE, dcSpark and Milkomeda. It can be traced back to the original joint work between Ergo, Emurgo and Input Output in 2020, as it counted with contributions from 3 out of the 5 researchers and developers from the original team (while the other 2 focused exclusively on SigmaUSD on Ergo).

This project is supported by the Djed Alliance, an organization that is the steward of the Djed stablecoin protocols with the mission of bringing stability to the cryptocurrency industry. The Alliance supports all the deployments of Djed.

The initial development of this implementation of Djed received a grant from Project Catalyst, Cardano’s community-driven decentralized innovation fund.

To support this project further, vote on this Catalyst proposal, backed by the Djed Alliance.