Charles Hoskinson explained how Djed’s stable coin will be safe despite its algorithm base.
Cardano is an 8th-ranked crypto project, in terms of 24 hours trade volume of its native token ADA. Charles Hoskinson is the founder of the Cardano project and also he is one of the co-founders of the Ethereum project. Last year he proposed an algorithm-based stable coin idea, dubbed Djed.
As we know, since Monday of this week, Terra’ UST stable coin and its native coin Luna are facing huge corrections because of fear among the crypto traders. Terra’s UST is based on an algorithm, instead of a collateral concept. In particular, Luna and UST are integrated together to maintain the price of UST at $1.
At present time, the price of the UST coin is $0.61, which means UST Is down by 39% from its actual $1 value.
Charles Hoskinson responded to this situation seriously and noted that it is just like an attack on the Defi (Decentralized finance) based platforms or cryptocurrencies, which can face the ground test any time due to attack. Charles also indirectly hinted that even a small initiated exploit may ruin the whole success of the project.
A Twitter user asked Charles about Cardano’s upcoming Djed stablecoin, which is also based on the algorithm concept, and more likely to UST coin. That user asked how Djed will be risk-free or may not face this situation.
Then Charles responded and said that the reservation of a huge amount of collateral behind stablecoin will save it.
However in the past, when Charles introduced his Djed stable coin idea, then at that time he explained mathematically very well that in every critical situation Djed will be able to maintain stability easily but still he is dependent fully with plan B to deal the situation.
According to available information, Djed is also an algorithmic stable coin and its algorithm is based on a 400%-800% collateral ratio for Djed and Shen (Djed’s reserve coin).