Milkomeda Accelerator: Introducing the Djed Alliance
During the past week, we’ve been introducing the Batch 1 projects that we’re thrilled to be joining the Milkomeda Accelerator Program! We believe these are all promising projects with great potential to make a positive impact and bring new possibilities to the Milkomeda ecosystem. The final exciting project we’d like to introduce is the Djed Alliance and the Djed stablecoin.
What is Djed?
Djed is an algorithmic crypto-backed stablecoin protocol that is managed by smart contracts and acts like a fully autonomous central bank, buying and selling stablecoins and reservecoins to maintain the stablecoin’s peg. The Djed stablecoin protocol is platform-independent and can be deployed on any chain.
The stablecoins issued by the Djed protocol are over-backed by a reserve of crypto. The deployer of the protocol chooses this reserve crypto, and the base currency of the chain, e.g. mADA on Milkomeda, is the typical choice. The deployer of the protocol also chooses which FIAT currency the issued stablecoins are pegged to e.g. EUR, USD, JPY. Finally, the deployer sets an upper and lower bounds for the reserve ratio of the protocol.
Djed issues two coins: stablecoins and reservecoins. Users buy stablecoins with the reserve crypto at the current market rate and sell stablecoins back to the protocol for reserve crypto at the current market rate. Users who want to support the protocol purchase reservecoins for reserve crypto. Minting and burning fees are paid for each transaction conducted with the protocol and are accumulated in the protocol’s reserve. Similar to liquidity providers in a liquidity pool, reservecoin holders benefit from these fees proportionally to their reservecoin holdings.
When the lower and upper bounds of the reserve ratio are reached, certain functions of the contract are turned off to prevent the stablecoin from becoming unbacked and losing its peg, or to prevent there not being a large enough incentive for reservecoin holders to keep their assets in the protocol. These limits never turn off the ability for a user to return their stablecoins to the contract and withdraw the underlying asset.
What the Djed Alliance Brings to Milkomeda C1?
The Djed Alliance brings the algorithmically crypto-backed Djed stablecoin to the Milkomeda sidechain providing users with one of the fundamental elements necessary for DeFi to operate on a mass scale. Djed’s formally verified, algorithmic and crypto-backed nature provide assurance to Djed users of its ability to weather the storm and keep its peg in tumultuous market conditions.
Who is Djed Alliance?
The Djed Alliance is an open and free association of entities, individuals and organizations, with the common goals of researching, developing, deploying and using Djed, the first stablecoin protocol where stability claims have been mathematically proven and formally verified.
The Djed stablecoin protocol originated from an informal collaboration between three companies: IOHK, Emurgo, and Ergo . Researchers from IOHK conducted the research and formal verification of Djed, and engineers from Emurgo and Ergo did the first implementation of the Djed protocol, SigmaUSD, which has never lost its peg.
Follow the Djed Alliance
Research Paper: Here