Djed: A Stablecoin in Cardano That Must Evolve

Li₿εʁLiøη
3 min readJan 24, 2023

At the time of writing this article, the next release of Djed, announced for this January, still has inaccuracies in its date, and certain features that, in my opinion, need to be improved.

It will never be my intention to create FUD or FOMO, neither in our Cardano Community or any other. I always seek the truth, with constructive criticism to evolve. The polite does not take away the brave.

I believe the protocol of Djed Cardano stablecoin is one of the most robust, if not the most robust in the crypto industry, of the ones I have researched, but I have these doubts about Djed’s release.

I find four centralization problems and two security problems, which ultimately all impact security. Let’s see.

— 1. Centralization: COTI will be the only platform to launch $Djed, which was handpicked by IOHK. Would anyone else be able to run the stablecoin protocol? Yes, but,

— 2. Centralization: They state that the protocol is open source but I have not seen it published on GitHub (or any other repository), and only the prototype is published on GitHub.

— 3. Centralization: COTI maintains the oracle that reports the USD/$ADA conversion rate and but the sources come from 6 different exchanges. If COTI stops maintaining the oracle, the smart contract is locked and no one can mint/burn $Djed or $Shen for $ADA.

— 4. Centralization: COTI will increase the rewards of Djed reserves by delegating the reserve contracts, and will unilaterally decide to which stakepools to delegate the funds blocked in Djed contracts. COTI said: “…to create another revenue stream for our SHEN holders, we will delegate the ADA in the contract to specific stake pools, and 100% of the rewards received will be transferred to the reserve … the stake pool operators that we will be working with will be screened and very carefully picked according to different parameters to ensure the stability, security, and functionality of the contract is not affected.” (1)

— 5. Security: I have not seen published, yet, the audit document (I think it is from Tweag). COTI has been promised on mainnet in January, February is 10 days away. COTI said: “…will be live on mainnet this January, 2023 following a successful full audit.” (2)

— 6. Security: COTI will lunch minimal version first (January 2023). Section 4 of the Whitepaper says that Minimal Djed has 6 “minor issues” that will be fixed with the Extended version. Extended Djed is more robust. One of these “minor issues” is “Reserve Draining Attack with Price Foresight”.

Whitepaper

If you want to understand Djed better, read my article that has 2 parts, in the first one I explain how the protocol works, in the second one (linked at the end) I show you examples and compare it with other stablecoins: Djed: A Stablecoin In Cardano. Deep Dive. — Part 1

(1) Djed AMA Recap

(2) Update From the Cardano Summit Main Stage: We Have a Date!

--

--

Li₿εʁLiøη

Researcher • ϚʁyptøWriter • Content Creator | 𝕏 @liberlion17 | nostr liberlion@iris.to | website: liberlion.com