Please describe your proposed solution.
The Djed family of stablecoin protocols is characterized by being crypto-backed and autonomous. Users can buy and sell stablecoins and reservecoins by interacting with the contract for prices that depend on an oracle and on the reserve ratio. The contract's algorithm aims to keep the reserve ratio significantly greater than 100%, thus ensuring that every stablecoin is backed by significantly more than 1 USD worth of ADA and can absorb significant price shocks. Stability theorems have been mathematically proven and formally verified, and the paper was accepted at the IEEE International Conference on Blockchain and Cryptocurrency.
This implementation of a stablecoin protocol on Milkomeda is based on the Osiris version of Djed, which improves the Minimal version by allowing the sale of reservecoins even when the reserve ratio is below the minimum threshold, provided that stablecoins are simultaneously sold in a proportion that increases the reserve ratio. This makes it easier for the reserve ratio to recover and for the peg in secondary markets to be restored even in situations where the demand for stablecoins is high and the demand for reservecoins is low following a price shock (a situation that is currently affecting SigmaUSD and COTI's Djed, making them trade above the peg at secondary markets). This version also introduces maximum transaction limits, in order to reduce the wholesale discount effect described in the paper.
Our solution is composed of:
- Fully immutable smart contracts, running on Milkomeda.
- A frontend (accessible here: <https://milkomeda-c1.djed.one>) that has also been deployed to IPFS (InterPlanetary File System) and that can also be run locally by anyone.
Therefore, it is fully autonomous, zero-governance, not operated by anyone, censorship resistant, transparent (with code open to inspection and contributions), audited and rent-seeking-free.
To know more, watch our whiteboard animation video.
<https://youtu.be/XAalC8F6-SU>
How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?
Stablecoins are explicitly listed here (<https://cardano.ideascale.com/c/campaigns/348/about>) as being of a type of project addressing the Products & Integrations challenge within the DeFi category.
As the challenge states, "Cardano needs a thriving ecosystem of different products and integrations for the community to use that increasingly become the better alternatives over current centralised providers". Djed Osiris on Milkomeda is the first fully decentralized (operator-free, governance-free, fully imutable) stablecoin protocol in the Cardano ecosystem, and thus directly addresses the challenge's statement.
Stablecoins are a foundational building block to enable DeFi to flourish on Cardano. Djed Osiris ensures that this foundation is strong and reliable.
How do you intend to measure the success of your project?
We are focused on the following indicators of success:
- Getting listed by major DEXes on Milkomeda.
- A high TVL compared to the TVL on Milkomeda. (Based on SigmaUSD experience on Ergo, a TVL greater than 3% of Milkomeda's TVL could be considered a success.)
- A high transaction volume, minting and burning stablecoins and reservecoins in interactions with the Djed Osiris contract.
The Djed Osiris stablecoin on Milkomeda will positively affect Cardano's productivity and growth in the following ways:
- Since the protocol uses (m)ADA as a reserve asset, it creates extra utility for ADA.
- It increases the demand for ADA, since ADA is needed to mint stablecoins and reservecoins.
- Like any other stablecoin, Djed Osiris brings the typical use cases of stablecoins (e.g. payments, remittances, hedging against volatility, leveraging, …) to Milkomeda and Cardano. In contrast to other stablecoins, it does so in a fully autonomous, decentralized, immutable, governance-free way.
Please describe your plans to share the outputs and results of your project?
The Djed Alliance is an open network of individuals and entities. Our already executed plans to share the outputs and results within this network and with the wider public include the following:
- GitHub Repositories: the code that we have produced is available in the Djed Alliance's GitHub space.
- Adoption by DEXes: we have engaged with DEXes on Milkomeda to get Djed Osiris listed in them, so that the DEXes themselves and their users can benefit from this stablecoin protocol.
- Tweets: we informed the public of the outputs and results through the Djed Alliance's Twitter Account.
- Discord: we maintain a Discord server for communication.