The release of Cardano’s smart contract functionality has opened the floodgates to new and exciting crypto projects. One of these is COTI a crypto project, which is famous for making it possible to pay with ADA.

COTI is set to take center stage in Cardano’s ecosystem with the upcoming creation of the DJED stablecoin, which will be issued by COTI.

Today I’m going to tell you everything you need to know about COTI including its history, how it works, COTI’s tokenomics, COTI’s price potential, and where this project is headed.

 

Disclaimer: After getting the whole permissions, all the content converted from Coin Bureau’s “COTI: Cardano Djed Issuer! What You Need To Know!” video.

COTI History

COTI was founded in early 2017 by Samuel Falkon and David Assaraf.

David has worked in finance for nearly two decades, and his former employers include KPMG the bank of Israel, and HSBC.

Samuel has extensive experience in various industries including sales, international trade, payments, and marketing.

Samuel currently sits as COTI’s VP of business development. COTI began with the goal of creating a global payments application on Ethereum, but the early COTI team quickly realized the only way this application could scale to a global level was to create a new cryptocurrency.

As part of this pivot serial entrepreneur Shahaf Bar Geffen was brought in as CEO, and he has since become the face of COTI.

COTI was developed by COTI group a for-profit software company registered in gibraltar but based in Tel Aviv, Israel.

COTI attracted a lot of attention in its early days for many reasons. For starters the project was introduced in the middle of the last bull market.

At the time it was one of the only crypto projects promising to scale to tens of thousands of transactions per second. This would have been an outlandish claim were it not for COTI’s team, which included heavyweights like Dr. Nir Haloani, a seasoned computer scientist, who pioneered data compression, and sold one of his many patents to IBM before signing on as their head of research.

 

COTI also had some seriously prolific people on its advisory board including the former chief investment officer of BlackRock, and the former chief risk officer of Ripple Labs.

 

To top it all off COTI is an acronym that stands for currency of the internet, which gave it an additional marketing edge over other crypto projects at the time.

As a result COTI managed to raise around 20 million dollars across various token sales, which I’ll get to in a bit.

COTI first connected with Cardano in December 2018 during the Cardano meets the startup nation event in Tel Aviv. The COTI mainnet went live in June 2019, and went on to announce multiple partnerships with crypto-related projects such as Simplex.

In the months that followed at the end of 2019 COTI announced AdaPay one of the many applications that are part of COTI’s universal payment system.

 

In April this year COTI became the first crypto project to receive a grant from Cardano’s cFund ecosystem fund.

 

During the Cardano summit last month Cardano founder Charles Hoskinson took the stage with Shahaf to announce that COTI would be issuing Cardano’s DJED stablecoin more on that later. So, how the hell does COTI work? In contrast to most cryptocurrencies COTI does not use a standard blockchain it uses a directed acyclic graph or dag.

How COTI Works?

In contrast to cryptocurrencies that use standard dags COTI consists of multiple dags, which make it possible to issue multiple tokens.

COTI’s multi-dag infrastructure is colloquially referred to as the Trust Chain, and this is because it leverages a novel consensus mechanism called Proof of Trust (PoT). In Proof of Trust (PoT) the validity of a transaction is determined by its trust score, and a transaction’s trust score is initially derived from the identity of the user making the transaction.

A user’s trust score improves over time with every valid transaction they make, and is reduced when they make an invalid transaction or transact with any users with a low trust score. Invalid transactions are tracked by double spend prevention nodes, and any disputed transactions can be put up for arbitration, which is colloquially referred to as mediation.

 

In mediation a randomly selected panel of mediators staking COTI vote on, which party is correct in any given dispute, and earn COTI for doing so. If the transaction in question is found to be invalid it is reversed.

 

In addition to Double Spend prevent nodes the COTI multi-dag contains Full Nodes, Trust Score Nodes, and History Nodes.

Full nodes process all transactions on COTI, and attach them to the dag. Each full node can set its own transaction fees.

Trust score nodes keep track of a user’s trust score, and update it in accordance with the parameters defined by the trust score update algorithm two of which I mentioned a few moments ago,

Obviously history nodes store the full transaction history of COTI’s multi-dag.

COTI community members can also run community nodes, and as far as I understand they are only able to provide full node transaction processing services for the time being.

COTI’s staking rewards range from 15 to 25 percent depending on the amount of COTI staked, and this COTI can be delegated by other users.

Delegators earn the same percentage at least according to stakingrewards.com. This elaborate architecture allows COTI to process over 100,000 transactions per second, and it’s all made possible because of KYC.

Every single participant on COTI must provide KYC documentation, and a proof of address document this includes coding nodes, COTI mediators, and COTI users. Because COTI’s KYC requirements are in line with the FATF (Financial Action Task Force) users from high risk jurisdictions are not allowed to use COTI.

 

A convenient consequence of this compliance is that it makes it easy for COTI to integrate with the existing financial system. Hence why COTI applications can combine crypto with banking, payments, trading, everything really.

Much of COTI’s ecosystem can be accessed via Viper, COTI’s one, and only wallet, which is available on web, and mobile. The COTI coin lies at the center of this ecosystem, and this brings me to COTI’s tokenomics.

 

COTI Tokenomics

COTI is the native coin of the COTI Trust Chain, it’s used for staking, and to pay for transaction fees.

COTI also exists as an ERC20 token on Ethereum, as a BEP2 token on the Binance Chain, and as a BEP20 token on the Binance Smart Chain (BSC).

This is because COTI was originally sold as an ERC20 token in 2018, and bridged over to the Binance ecosystem shortly after its mainnet launch in 2019.

COTI has a maximum supply of 2 billion, which was allocated as follows; 30 percent for token sales, 45% for staking rewards, and community reserves 15% for the team, and 10% for the advisors.

I will note that this allocation was adjusted twice along with the vesting schedule for the various parties involved. The current vesting schedule will see the last COTI coin issued in 2032, and can be seen here.

 

As I mentioned earlier COTI raised roughly 20 million dollars across various token sales. Two of these took place in 2018, and they raked in 16 million dollars at an average price of eight cents per COTI.

COTIalso held an IEO on KuCoin in 2019, which raised an additional three million dollars at an average price of 6.5 cents per COTI.

 

Unfortunately COTI’s own blockchain explorer does not provide a rich list, which makes it hard to see current distribution of COTI. According to Etherscan COTI has a supply of 1.6 billion. Most of it is held by Binance, and another substantial chunk has been deposited into a smart contract address.

A quick look through the Binance chain explorer, and Binance Smart Chain (BSC) explorer reveals that 340 million additional COTI are being held between these chains. Though I can’t say for certain it looks like only around 55 million native COTI are in existence, which would make sense given that most exchanges only support COTI’s ERC20 version. The only two exchanges that currently support native COTI are Huobi and KuCoin.

COTI Price Analysis

In terms of price action, COTI was performing pretty poorly until February this year, when it saw a sudden spike presumably in response to the introduction of COTI Staking 3.0.

Staking 3.0 increased the amount of COTI a community validator could stake along with the staking rewards they could earn. Aa strong demand driver to say the least.

 

COTI’s parabolic pump continued into March, and the peaks we saw there were probably caused by the sit-down COTI’s CEO Shahaf Bar Geffen had with Simplex CEO Nimrod Lahavi about COTI’s upcoming bank account, and debit card.

 

COTI rallied with the rest of the crypto market in April, and crashed with it in May. By July COTI’s price was looking pretty bad.

It seems that the only thing that kept COTI from collapsing completely was the release of its NFT game around that time.

The reversal finally came in august, and it couldn’t have been any more epic, it all started with the announcement that COTI’s Viper Wallet was finally available on IOS.

A few days later COTI released more details about its upcoming bank account, and debit card along with a confirmation that Shahaf had received the first COTI debit card.

 

At the end of August COTI announced that Huobi would be listing both native, and ERC20 COTI on its exchange, and less than 24 hours later Coinbase announced they would be listing ERC20 COTI as well.

Just when COTI holders thought the pump was over September rolled around with even more bullish announcements, first an updated roadmap was released, which I’ll get into shortly.

COTI also announced partnerships with two Cardano projects notably Ardana, which I highlighted as one of the top Cardano projects in a recent post.

 

COTI managed to push up to 65 cents when the news came out that COTI would be issuing Cardano’s DJED stablecoin, and the price point was sustained by the official release of COTI’s bank account, and debit cards.

Although this price action is quite impressive it pales in comparison to most cryptocurrencies during the same time period, and especially in terms of initial coin offering returns on investment.

 

However you could argue that COTI is only beginning to take flight. After all it has some pretty exciting developments in the works, and most pressing of them all is Cardano’s DJED stablecoin.

DJED Explained

Cardano founder Charles Hoskinson first teased DJED back in July, and DJED white paper was released shortly afterwards.

I did my best to understand it but the maths I’m afraid completely flew over my head. However luckily for me ERGO did a presentation about DJED’s underlying mechanisms earlier this year, and IOHK simplified it in an August blog post, which I’ll leave in the below if you want to give it a read.

 

DJED is basically like a combination of AAVE, and Maker DAO i.e like a standard lending, and borrowing protocol combined with a standard stablecoin mining protocol.

 

Let’s say you have some ADA that you want to use to mint DJED, and let’s assume DJED is pegged to the US dollar because it will be at the outset.

Note that there can be multiple digits for different fiat currencies. When you deposit ADA into DJED smart contract you are given a dollar amount of DJED equal to the ADA you deposited minus the fee.

So, for example ten dollars in ADA gives you nine dollars of DJED with one dollar as the fee. At any time DJED holders can come to the smart contract, and redeem their 19 of DJED for 19 of ADA minus another fee.

In your standard stablecoin minting protocol you need to deposit a much larger dollar amount of collateral than the dollar amount of stablecoin you’re minting, because the value of the collateral can drop, and this means there wouldn’t be enough of it backing the stable coins in circulation.

 

The reason why this over collateralization isn’t necessary to mint DJED is because of a second pool of participants, which you can think of as lenders in your standard lending, and borrowing protocol.

These lenders give additional ADA to DJED smart contract to make sure there’s always enough ADA collateralizing DJED in circulation.

These lenders get a reserve coin in return. Reserve coin holders earn a portion of DJED’s smart contract fees, and are also entitled to any profits on the collateral on a proportional basis.

 

For example if you deposited twenty dollars of ADA to mint 18 of DJED, and the ADA you used to mint that DJED doubled in price while it was in the smart contract reserve coin holders would be able to claim that twenty dollar profit, because you are only entitled to eighteen dollars of ADA.

To make sure that DJED stablecoin is always adequately collateralized by lenders aka reserve coin holders, DJED smart contract will automatically stop the stablecoin minting mechanism, if there is too little collateral, and also if there is too much collateral.

That second condition might sound strange because more collateral sounds better on paper. The problem there is that too much collateral dilutes the earnings of lenders who are providing collateral, which could create incentive issues.

If you’re wondering where COTI fits into this picture the answer is the lending side. From what I can gather from the official DJED website, accredited investors aka high net worth individuals can apply to provide the collateral for DJED stablecoin through COTI.

It’s not entirely clear when we will see DJED go live, but Shahaf mentioned during the Cardano summit that we should see the first DJED stablecoins minted in the coming weeks.

Another major COTI milestone in the works is the recently announced COTI Treasury, which will allow users to state COTI to earn a cut of all transaction fees in COTI’s ecosystem.

 

These fees will come from COTI’s stablecoin factory its enterprise, and merchant services, treasury services, payment services, partnerships, and a portion of Trust Chain fees. The only problem is that almost none of these features are currently available, and it’s unclear when they’ll come around. 

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