Brief Thoughts on Djed

Hi, this is Charles Hoskinson, live from warm, sunny Colorado. Always warm, always sunny, sometimes Colorado. Today is October 13th, 2025. I want to make a quick video to talk to you about a topic that I've been involved in for a very long time. A lot of people know me from the Ethereum days or the Cardano days, but I was briefly involved in my very first crypto project a long time ago called Bitshares.

It's the paper we wrote, "Bitshares: A Peer-to-Peer Polymorphic Digital Asset Exchange," and I wrote it with Stan and Dan back in 2013. This was actually the very first algorithmic stablecoin and the very first DEX in the history of the cryptocurrency space. Bitshares successfully launched; it was kind of ahead of its time. It had a kit called Graphine, which was the parity substrate of its time, and it was the first to market with delegated proof of stake. The algorithmic stablecoin was something we chased for a really long time, and it was a lot of fun to see how people never let that dream die, leading to things like MakerDAO, which came from the Bitshares team, and then later on Luna, which collapsed horrifically.

Well, anyway, if you take a look at Jed, it's the stablecoin we created in partnership with Cody to understand how to do that. It has been a really fun two-year experiment where we've learned an enormous amount. I asked a very simple question: "Analyze the Cardano Jed stablecoin and tell me what range it has traded in over the last two years 99.9% of the time." The Cardano Jed stablecoin is designed to maintain a dollar peg but has experienced significant volatility since its launch.

In the past two years, Jed has traded primarily in a tight band around 99 cents to a dollar, reflecting its intended function as a stablecoin. However, there have been a few notable periods that deviated significantly from its peg, notably a spike to $2.46 and a dip to $0.55. Though these are extreme outliers, for over 99.

9% of all trading days in the last two years, Jed traded within 97 cents to $1.03. The extreme outliers were rare and isolated events. People think that an algorithmic stablecoin has to maintain a peg 24 hours a day, 7 days a week, 100% of the time, in order for it to be a real asset. Algorithmic stablecoins are volatility dampeners.

The goal of them is to dampen volatility so that the asset trades within a reasonable range 99.9% of the time. In this case, that's 97 cents to $1.03. Jed has been on the market now for about two years, and we've learned a lot from this experiment.

It has reached a point where I believe there is merit to the model, but it needs an overhaul and redesign. We need to conduct a large-scale research project to take it to the next level. I think algorithmic stablecoins on Midnight will be the killer feature because you get algorithmic stability and transactional privacy. These two things together, along with no custodial risk, are significant. Midnight is designed to have a basket of assets, meaning you can pay transaction fees in Ether, Bitcoin, Solana, ADA, and a variety of other cryptocurrency options.

This means there will be many cryptocurrencies on that ledger. If you want to build a multi-asset collateral basket to dampen volatility a little bit, that's probably the next evolution of Jed. For applications that require a dollar all the time, if you have something that dampens volatility tremendously over a multi-year period, you can create a structured financial product on top of that to provide an insurance guarantee for a certain amount of dollar redemption for some sort of fee or price that you pay. Essentially, a derivatives market can form. You'll never achieve 100% stability; it's just not possible because these are highly volatile assets and highly manipulated markets.

One of the coolest things we've seen is ADA collapsing to $0.27, a massive 70% value reduction, and of course rebounding because they were manipulated markets. Jed fell to $0.55 but completely recovered to its peg within five hours. That’s a volatility dampening mechanism, and it’s extraordinary from that viewpoint.

You have to build your DeFi around the fact that it is a peg with eventual consistency, not day-to-day, minute-to-minute, or second-to-second stability. You need a trading mechanism that, during high volatility, freezes the Jed deposit for a period of time, allowing the markets to recover. If it’s just all algorithmic, it won’t recognize that this is an ephemeral concern, and then the DApp collapses. Jed is very much an experiment and a beta test. It’s by no means a perfect model, and there have been many lessons learned in the process of building it that we would do differently if we were to make a real product that launched at scale with billions of dollars of liquidity behind it.

But net-net, I’m really proud that after 12 years in the industry, we finally built an algorithmic stablecoin that was able to hold its peg relatively well, trading for two years between the bounds of 99.9% of the time at 97 cents to $1.03, with an asset that has gone from $3 down to $0.25, up to $1.60, down to now about $0.

70, amidst huge amounts of volatility and collapses like Luna and FTX. It’s really crazy when you think about it, and it’s magical when you consider it. One of the things we’d like to do for 2026 is bring a lot of stakeholders together to discuss the future of algorithmic stablecoins and what properties would be required to improve the model based on all the lessons we’ve learned. That would be a fun thing to do. We’re really busy with the launch of Midnight and Quantum Husky, so there are a lot of moving pieces and bells and whistles we have to work through.

But it would be fun to return to Jed and scale that up, especially now that we’re starting to get into these multi-asset things like Bitcoin DeFi and XRP DeFi. I wanted to make a quick video to congratulate the Jed team on what they’ve been able to deliver and put together. It’s been a long road, and there have been many lessons to navigate. It’s a very small team, all things considered, and its origins were interesting too. It has gone through many different market cycles and conditions, and the fact that it’s still here, still going strong, and has traded in that 99.

9% window between 97 cents and $1.03 is a testament to a pretty good design. So, algorithmic stablecoins, never give up the faith, never give up the dream. People want stability, and I think there’s a DeFi approach to produce it, especially if you have winners and losers inside that setup and you’re prepared to pay a premium for it. Asset-backed stablecoins are, of course, a thing, but understand they are completely centralized.

They have an issuer, can be frozen at any time, and everything you buy is tracked. That’s the downside. If those are things that are important to you, your only option is an algorithmic stablecoin. So there you go. A quick video—have a look at Jed.

If you’re interested in the topic of algorithmic stablecoins, we’ll probably have a Jed summit at some point to bring everybody together, have a long conversation about it, and see if there’s a path to integrate it into the Midnight ecosystem to be private as well. Cheers.