Djed makes ADA a reserve currency

The basic principle of the Djed project is to use one digital asset’s value to create another. Djed uses the volatile value of ADA to create a stablecoin with a value pegged to the USD. This makes ADA the reserve currency. This only applies to the Cardano ecosystem. However, the concept of algorithmic stablecoins is a way in which we can replace fiat currencies. Before the gold standard was abandoned, money was backed by precious physical metal - gold. A central authority is necessary for such a system to work. The concept of algorithmic stablecoins is the gold standard for the digital age. We are able to use deflationary cryptocurrencies like ADA or BTC as collateral for stablecoins like DJED. Based on the Cardano blockchain and Plutus algorithms, this currency can work without a central authority.

TLDR

  • The main problem with today’s money is the lack of attachment to a scarce commodity or asset and the presence of a central authority.
  • Algorithmic stablecoins may become the new gold standard.
  • DJED is backed by ADA value that has a limited quantity so stablecoins can’t be printed out of thin air.
  • If demand for DJED is high, an increasing amount of ADA coins will be locked in the Djed reserve.
  • Stablecoins may end the era of fractional reserves.

This article was prepared by Cardanians with support from Cexplorer.

Read the article: https://cexplorer.io/article/djed-makes-ada-a-reserve-currency