It Decentralized Finance Cardano’s (DeFi) ecosystem is developing rapidly. In a new update shares Input Output Global (IOG) – the company behind Cardano – that the introduction of the Djed stablecoin on Cardano has greatly helped the DeFi ecosystem within the network.
Djed is a stablecoin developed by the payment platform COTI Network (COTI) and went live on Cardano in early 2023.
How does DJ work?
The stablecoin within the Cardano ecosystem is backed by 6 Cardano per Djed. At current rates, that equates to a hedge of more than $2 for a stablecoin carrying a value of $1. That high coverage is obviously necessary due to the volatility of the crypto ecosystem.
If the coverage were a lot lower and close to $1 in Cardano, Djed would also lose its reliability for many people. Now you still have to dare to get one stablecoin ultimately backed by a volatile crypto.
We have of course seen that before with Terra – although it was set up slightly differently. At the time, $40 billion in capital was lost there. In that respect, it is to be hoped that Djed and Cardano will have a better fate. Although at Cardano it is not even possible to let $ 40 billion in capital go up in smoke, because the project is only worth $ 13 billion.
Scalability with Hydra
Another area in which Cardano has improved a lot in recent times is in the field of scalability. IOG calls Hydra a “family of layer-2 protocols” designed to make Cardano more scalable. According to the company behind Cardano, the network has improved dramatically as a result.
“Hydra gives developers the potential to create their own mini-blockchains for functions that can be controlled outside of the blockchain,” said IOG. In principle, Hydra is a bit like Bitcoin’s Lightning Network, which is also designed in this way.
The name Hydra is of course based on the creature from mythology, which has several heads. In this case, it is a digital beast that makes it possible to create multiple mini-blockchains.