In this edition of Bitrue x COTI Network’s “Ask Me Anything” session on Twitter Spaces, a special guest from one of the most prominent projects for 2023, COTI Network, joined us. Alexander Panasenko, the Director of Product Management at COTI Network, talked to us about COTI’s recent issuance of the Djed and Shen tokens. Owing to his background in TradFi tech, Alexander had lots of corporate experience under his belt. He is now primarily responsible for all product releases by COTI. In his self-introduction, Alexander stated, “In technology, I trust.”
The Q&A’s of the “Ask Me Anything” Session went like this:
Q1. Can you brief us a little bit about COTI and the newly issued stablecoin Djed and Shen, and how will it compete with other stablecoins?
Sure thing. I’ll start from the beginning. COTI is a DAG-based Layer 1 designed explicitly for Enterprises. It was founded in 2017. It’s oriented toward solving payment-related challenges and offering various enterprise-grade solutions by enabling enterprises to establish their private payment networks, for example, by issuing payments and utility tokens.
Djed, on the other hand, is an overcollateralized stablecoin that uses Shen as its reserve coin, which can be minted by providing collateral in the form of ADA. In simple terms, Djed aims to maintain a 1 USD value at all times and basically uses Shen to ensure its stability. The incentive for Shen token holders comes from earning rewards for the ADA collateral they have provided. This is achieved via the mint and burn fees collected by the smart contract and reward delegation for the reserve pool. Just to recap where we are currently at, Djed has already reached a 30% dominance among native Cardano stablecoins in four weeks since its launch, and we plan to continue this trend. We aim to achieve this through our network of partnerships. Currently, we already have 40 and counting. By providing utility for conducting payments with Djed, Djed Pay solution that we plan to launch based on our Djed Roadmap, this will help grow adoption, facilitate the Cardano ecosystem’s growth, and, of course, increase the demand for both Djed and Shen.
Additional stats that I can share with you is that Djed is currently positioned as the 65th out of 95 available stablecoins in the world in terms of market capitalization. However, we expect it to continue to grow and progress in the list as Cardano network adoption grows, followed by the demand for stablecoins that will increase Djed’s market capitalization. Lastly, I would like to say that Djed and Shen can both be minted on djed.xyz. It can also be obtained on Bitrue and on decentralized DEXes such as WingRiders, Minswap, and Muesliswap.
Q2. Obviously, with such a great project there is also a great team that works really hard to put together all the pieces here. Can you explain a little bit about the team behind the projects and also are there prominent investors or partners that support the project as well?
Sure. As you probably know, this project was a joint venture between COTI and IOG. This partnership was based on IOG doing the research and development work related to the Djed smart contract. As for COTI, we power the product by enabling access via the graphic user interface, basically djed.xyz. In addition, our development team provided the technical input and implementation site to the IOG team during development. COTI is also responsible for establishing the partnership network to help drive Djed’s stablecoin adoption in the Cardano ecosystem. This was achieved via our excellent business development teams and our marketing team, responsible for communication. Our partnership with IOG was fruitful for all parties involved, and we plan to improve our initial offering based on the Djed Roadmap. We are evolving with our partners. So, I want to take this opportunity and thank all parties involved for their dedication and effort that facilitated Djed’s successful launch.
Q3. Now let’s talk about Djed and Shen. What are the utilities and the tokenomics looks like, are there any prominent use cases in the future that the community should know?
Sure, that’s a great question. So in terms of the tokenomics, I think what is important to understand is the Djed stablecoin’s main objective. As the name suggests, it aims to provide a stable and volatility-resistant coin that will enable the growth and adoption of the Cardano network. Basically, stablecoins are huge enablers for conducting business on the blockchain. When trying to maintain a viable business model, accepting payments in highly volatile assets can be proved problematic. So, the standard practice in the traditional financial industry is that if you receive any form of volatile currency, your goal would be to exchange it for a less volatile currency to reduce the risk of losing value.
This is exactly what Djed offers to the Cardano ecosystem, a stablecoin that will enable the growth and adoption of the network itself. Along with our growing list of partnerships, recently, NMKR announced that users can now buy NFTs with Djed. This is big, and you can expect more news to come when our marketing team releases it.
Q4. We would love to know more about its mechanism, and you mentioned that Shen is the reserve coin, how does Shen benefit its holders?
Basically, Shen holders benefit from the mint and burn fees that the smart contract collects. In addition, they gain delegation rewards for their ADA collateral. We are also working with DEXes to ensure that the liquidity providers will gain the delegation rewards as they provide liquidity to the DEXes. As more Djed is minted, the reserve ratio decreases. It becomes a great opportunity to mint and hold Shen. This enables the minting of additional Djed, so on and so forth.
Q5. We know that the recent market downturn brought so much impact to the crypto space. I’m sure that the development of Djed and Shen is somehow also impacted by the current situation. How do you feel about this “Crypto Winter” situation and what the team has done to nurture and navigate the project throughout this situation?
Well, I don’t think that we have sustained any direct impact caused by the crypto winter in terms of development, right? With that being said, there is an obvious general ‘winter mood’ in the market that drives a lot of FUD that is going around at the moment. My personal take is that, in the end we are building technology that is bringing value to the world and the Cardano ecosystem in particular. With the introduction of Djed, I think there is an opportunity for SHEN holders, particularly those who are long term supporters of the Cardano project, to gain from holding Shen, as we transition from winter to spring. There is even more opportunity for technology builders and not ‘hype builders’ during these times. That’s my take on the subject.
Q6. Bitrue exchange currently has an opening of a Staking Pool with 50% APY offering, where it is essentially a flexible staking option that can support the Djed and Shen community. In terms of collaboration and partnership, from Djed and Shen as a project. What kind of support do Djed and Shen need from project partners, especially exchanges, and in return, what kind of support or collaboration that project team usually can explore with exchanges?
Well, first of all, I want to thank Bitrue for being the first CEX to list Djed. That is really a show of support that will help drive adoption and availability of Djed on the market. Mostly, I would like to see collaboration regarding ways to generate additional value for Djed and Shen holders. As the offering brings more value to the holders, it will circle back in the form of adoption and growth and secure the project success for the long term.
Q7. Rest assured 2023 can be a redemption year for Crypto where we as a community can strive back and utilize the blockchain technology for a good use. Could you give us a little brief about Djed and Shen 2023 project roadmap, are there any prominent plans or delayed agenda from 2022 that will be the team’s focus in 2023?
Sure. Like we published in the media, Djed has a roadmap. From a product perspective, the current offering is basically an entity, a minimal viable product. We are doing a lot right now regarding the UI improvements because the initial offering that we went with during the launch date wasn’t sufficient. Basically, we did some design work to improve the overall usability, the looks, and the feels of the UI. In addition, based on the community feedback that we received, we introduced multi-wallet support. I think there’s a list of seven currently supported wallets that enable you to mint and burn Djed and Shen.
We are working with DEXes to ensure that people who provide Djed and Shen liquidity to DEXes will also benefit from the platform’s delegation rewards. On technological aspects, we will support Plutus v2. With the rollout of extended Djed, we will also support multiple delegation. Obviously, we would like to see an increase in the count of partnerships that we currently have. So, that’s 40 and counting. So I think, yeah, that basically sums it up.
Q8. A question from @Cryptoboy12300, “Will there be a pegging issue like the one that recently affected Luna and USTC? What steps has COTI made to ensure that similar mistakes won’t happen again?”
Sure, that’s a great question. It’s not a good comparison as both stablecoins have totally different mechanisms to ensure the peg to the USD. I always encourage people to educate themselves, read the whitepaper, and follow our posts on Medium. I think Marketing has done a great job in explaining the differences. You can find those articles on COTI network or by looking up COTI Network on Medium.
The Djed contract has sufficient Shen collateral to redeem Djed stablecoin in circulation for 1 USD worth of ADA. In fact, it can have up to 800% in collateral, which is a lot. Moreover, if the collateral ratio goes down below 400%, the contract disables the ability to mint additional Djed. This assures Djed holders that they can return to ADA if the need arises. So, this all is solidified on the smart contract level.
Regarding USTC, the peg mechanism was completely different, right? That revolved around minting and burning LUNA. That was what eventually caused the death spiral that Terra experienced under those market conditions. It’s different. The protocol was encouraged to keep stablecoins out of circulation by offering a lot of APY and promising future yields.
Since Shen holders earn through mint and burn fees, they are incentivized to encourage stablecoins to remain in circulation to be burned and minted frequently to the contract based on the market demand. I hope that answers the question. It’s basically two separate use cases and two separate technologies. Obviously, when IOG was doing their research, they considered Terra LUNA’s approach and flaws.
Q9. A question from @Tiny_Wizard7 , “as a new stablecoin, how do Djed and Shen emphasize themselves in the industry and prove themselves to be fundamentally “stable “?”
That’s a good question. Like I explained, the stability of Djed is insured by high collateralization achieved by minting Shen. The contract will not allow minting more Djed if the reserve ratio has dropped below 400%. So, demand for Djed will drive the demand for Shen as the reserve ratio is reduced when it’s minted. Shen holders will then benefit from holding Shen. I hope this explains the mechanism.
Q10. A question from @prantokumar , “Security is an important segment for users today,how do you ensure the privacy, security and investments of its users against hackers? What precautions do you take against any attack?”
That is another great question. Basically, the code was audited by an independent third party, Tweag. We can always go and check that out to be assured that the independent third party has tested the code to reveal potential security vulnerabilities. Of course, all of those vulnerabilities were addressed.
In addition, we use industry leading cybersecurity tools to prevent penetration and different kinds of hacks on our systems. We have not experienced any hacks since 2017. So, I think we are doing a good job on that front. Security is on the top of our minds, and we are constantly trying to improve and consider new potential threats and how to defend ourselves against them. As the threats continue to evolve, so does our security.
Q11. A question from @frankpg823, “Hello Alex, I would like to know your opinion as a Director of Product management of COTI. Can you tell us how to stay cool in the current situation on the cryptocurrency market? And what makes you feel confident about the survival & sustainable success of DJED and SHEN in the near future?”
Okay, that’s a big question. So, I’ll do my best here. Well, I can offer you my personal take on the matter. Please don’t consider this any type of advice on how to behave and invest. It’s my personal view.
The industry is building novelty technologies that aim to improve existing solutions and sometimes even challenge and offer alternatives to what was previously considered as a standard in the traditional financial industry, right? I’m a firm believer in the value exchange system. When you build something that brings real value to the end customers, they will consume the product and repay you in value. At that point, we have achieved an exchange in value for that product. I can see that there are a lot of great projects that are disrupting many traditional and old fashioned industries. This led me to believe that blockchain technology, in all of its flavors, is the future.
With that said, there is also an ugly side to the industry. As the saying goes, the people have rightfully earned their government, so did the crypto industry rightfully earned its reputation. And I think it’s upon all of us to improve that reputation as the space evolves. Personally, I’m focusing on the technology, and the added value projects bring to the world. If people focus more on this, rather than making 900x on their investment, in a few weeks, the industry will benefit as a whole. I also think that the industry is going through some sort of puberty phase, and as it matures, the game’s rules will change. It will lead to a more stable environment to continue building the technology and driving adoption.
As for Djed, as I mentioned before, the purpose of Djed is to provide a solution for volatility and enable businesses and users to exchange value without the risk of taking a significant hit due to crypto volatility. So, Djed is dependent on the growth and adoption of Cardano ecosystem, and Cardano needs Djed to grow and drive adoption. So personally, I like Cardano’s methodological approach for building technology because they are on the right track. Djed is on the right bandwagon. That’s my take on the subject.
Q12. A question from @yarkabir7, “What are COTI’s top priorities in 2023? Could you share some plans for the upcoming year? without proper marketing and capital infusion, the project dies. How do you convince us you have adequate marketing power and capital to push this project to the top ?”
Sure. So I guess I’ll start with the Roadmap. So, as published, Djed has its own separate Roadmap, starting with version 1.1.1. We will go into the 1.3 Extended version with all of the additions I mentioned previously. We plan to launch the Treasury Governance token soon, which would be an additional utility for our treasury participants. We also have Treasury 2.0, which we recently published in the white paper, that explains all new mechanisms we will have, including stability pools and the reserve fund. Participants in the stability pool will gain rewards from liquidations. That’s a big improvement for our community participating in our treasury. In addition, if you’re talking about the business side, as I mentioned, COTI orients itself towards enterprise clients. To achieve this type of offering, we are planning to build COTIPay Business. This is basically a solution that will enable enterprises to launch their own Private Payment Networks with their payment tokens and utility tokens. This includes, for example, loyalty programs and such.
Of course, we constantly try to evolve our technological stack, which is essentially COTI v2. Blockchain technology constantly evolves, and many solutions exist to the same problems. Sometimes, even those solutions create new problems that need to be addressed. Therefore, we are always reviewing our technological stack. We currently have plans to continue evolving our network in terms of scalability, security, and adopting industry-wide standards. So, in a nutshell, I would say this is our road map.
I think we shouldn’t mix capital infusion and marketing. From my perspective, they both contribute to the project’s growth but have different functions. The capital does not flow into the industry in bear market conditions as it does during the bull market. So, I think if we focus on a value exchange system and build a sustainable business model, the project will not be as dependent on capital infusions because each business eventually needs to become profitable and use capital infusions to grow its activity and not just rely purely on capital infusions. We’re definitely strategizing towards that direction, want to go in that direction, and make moves to achieve that.
Djed is a perfect example for this, as it brings pure value to the ecosystem that needs it to grow and evolve. As the ecosystem evolves, it drives the demand for Djed. I think that blockchain projects such as Cardano offer a lot of value to emerging economies and less fortunate places in the world by providing previously inaccessible services for those regions. There is still a lot of untapped value and potential coming their way. We will also see this return to Djed with its adoption and growth.
COTI contributes by enabling businesses to utilize blockchain technology to make their businesses more efficient, cost-effective, tap into new markets, and gain access to new clients by starting to adopt blockchain technology. Combining COTIPay Business with COTI v2 technological advancements puts us on the right path to achieving our objectives. Also, we are monitoring the advancements of crypto space regulation. There’s a lot of talk about regulations, and I think this would be the burning topic of 2023. We are working on making our network future proof and coming up with solutions that will enable the industry to continue building while considering regulatory compliance and, of course, the privacy of its users.