The Ethereum rival is launching two stablecoins and a privacy-focused enterprise blockchain on its ecosystem. The ‘Djed’ and ‘USDA’ stablecoins and the ‘Midnight’ sidechain are expected to go live on the Cardano mainnet in 2023.
Cardano (ADA), one of the largest cryptocurrencies by market cap and the arch-rival of Ethereum, has unveiled plans to launch regular and algorithmic stablecoins and a privacy-focused enterprise blockchain for next year.
Input Output Global (IOG), the parent company of the proof-of-stake blockchain, has partnered with COTI, a DAG-based (Direct Acrylic Graph) Layer-1 protocol, to launch what the companies refer to as an over-collateralized algorithmic stablecoin. The U.S dollar-pegged ‘Djed’ stablecoin backed by ADA and COTI’s native SHEN tokens has a different liquidity structure when compared to regular stablecoins like Tether’s USDT, Circle’s USDC or Binance’s BUSD, which are all backed by cash and U.S Treasury bills. Djed’s algorithmic model will ensure price stability in the event either one of its backing assets (ADA or SHEN) experiences significant downside volatility. Select decentralized applications (DApps) and decentralized exchanges (DEXs) on the Cardano ecosystem will integrate Djed and will provide rewards to users who provide liquidity to these platforms using the stablecoin.
Terraform Labs used a similar model for its UST stablecoin which was backed by the company’s reserves in native token Terra (LUNA) and Bitcoin (BTC). After the onset of the crypto bear market in May which led to the collapse of LUNA and UST, the industry and regulators have lost faith in algorithmic stablecoins. COTI is assuring investors that Djed won’t follow the same pattern and will stay true to Cardano’s gradual and slow approach to development that puts security and operability above everything.
“Recent market events have proven again that we need a safe haven from volatility, and Djed will serve as this safe haven in the Cardano network. Not only do we need a stablecoin, but we need one that is decentralized, and has on-chain proof of reserves,” said Shahaf Bar-Geffen, CEO of COTI at the Cardano Summit.
Along with Djed, Cardano will release the USDA stablecoin in the first quarter of 2023. According to Emurgo, the commercial arm of IOG, USDA will be fully backed by cash and treasury bonds and is regulatory compliant. The stablecoin is part of Emurgo’s Anzen initiative, which aims to connect the Cardano ecosystem with crypto and traditional financial services. The Anzen portal will allow financial services like lending and borrowing, act as a bridge between traditional finance markets and DEXs, and release crypto-based debit cards on Cardano.
“The introduction of a fully fiat-backed, regulatory-compliant stablecoin is the next step in realizing the future of our community. This stablecoin not only offers stability to investors conducting financial transactions on the blockchain but advances a path forward for the Cardano ecosystem to address a problem we are uniquely positioned to solve – banking the unbanked,” said Vineeth Bhuvanagiri, Fintech Managing Director at Emurgo.
Emurgo has partnered with an unnamed regulated financial institution from the United States to issue the USDA tokens. The developers of the Cardano ecosystem are expected to release a feature that will allow users to convert other stablecoins, such as USDC and USDT to USDA. The company is also working on a feature that enables the conversion and swapping of cryptocurrencies including Bitcoin (BTC) and Ethereum (ETH) with Cardano using the stablecoin.
Cardano founder Charles Hoskinson also announced plans to release a new privacy-oriented enterprise blockchain called ‘Midnight’. The Cardano sidechain will leverage zero-knowledge-proof technology (ZK-rollups) to offer something beyond just privacy-focused tokens. Midnight will also deliver zero-knowledge-proof smart contracts to keep data anonymous on the blockchain.
ZK-rollups are second-generation scaling networks that are able to combine multiple transaction requests and process them in a single transaction on the blockchain. These sidechain networks make blockchains highly scalable, helping them conduct faster and cheaper transactions.
According to the CEO of IOG, Midnight will walk the thin line between preserving privacy and allowing regulators and auditors backdoor access into the system when granted permission. Midnight is an evolved form of privacy-coin technology where every piece of data is anonymous by default. Privacy coins like Monero and Zcash, which are popular among libertarian crypto-users who believe in the right to privacy, are viewed with doubt by regulators who fear that the tokens can be used to source funding for illegal activities. Hoskinson is of the notion that every individual and enterprise has a legal requirement to explore privacy, and that the difficulty of adding privacy to blockchains is what prevented the adoption of privacy-focused tokens.
With Midnight, Hoskinson is mainly targeting enterprises by re-igniting the once-popular field of enterprise blockchains. IOG is working with Hyperledger, a group that develops private and permissioned blockchains for large-scale firms, to release its institutional-grade private blockchain. Midnight will be powered by its own native token called DUST.
At the time of writing, ADA is trading at $0.31, up by 5% in the last 24 hours.