New algorithmic stablecoin on Cardano raises fears

Earlier you could read in the Cardano news that the CEO of stablecoin development company COTI had announced that Djed, the new algorithmic stablecoin, will be launched in January 2023. This stablecoin will be pegged to the US dollar and will exist on the Cardano network (ADA). ). Cardano users will be able to use ADA as collateral for it mint from Djed.

Djed leads to fears

Different people in the community of Cardano have expressed their concerns about the launch of the new algorithmic stablecoin. Namely, it is compared to the algorithmic stablecoin from Terra (LUNA), called TerraUSD (UST). LUNA and UST collapsed like a house of cards earlier this year after UST pegor peg, with the US dollar lost.

Cardano holders take to Twitter to say that they have little confidence in Djed after the previous collapse of UST. Algorithmic stablecoins are completely depreciated according to some people in the Cardano community, favoring a dollar-backed stablecoin like Tether (USDT).

I thought we already figured this out, algorithmic stable coins, not the best option. Have we already forgotten the Terra Luna debacle? Or are we looking for more Black Swans?

— BeerLife (@SBabt12) November 23, 2022

Circle, the issuer of USD Coin (USDC) and Euro Coin (EUROC), said in a statement that algorithmic stablecoins with complex collateral structures and technological stabilization mechanisms do not have the same value as regulated, fully dollar-backed stablecoins:

The collapse of Terra earlier this year underlined that not all stablecoins are created equal.

USDA stablecoin

Djed is not the only stablecoin on the Cardano network that will be launched in early 2023. Emurgo, the development platform and commercial arm of Cardano, had previously announced that USDA, the first fully fiat-backed regulatory stablecoin, will be launched in will be launched in the first quarter of 2023.

USDA is the first product to be brought to market with Anzens, Emurgo’s new product line, and will be pegged to the US dollar. Anzens aims to bridge the gap between traditional finance (TradFi) and decentralized finance (DeFi) smaller.