Djed is the first over-collateralized ADA-backed stablecoin contract that is developed on the Cardano network. At present, Djed has 28 Million ADA tokens as reserve backing and a reserve ratio of 620%.
Djed stablecoin is Cardano’s native overcollateralized stablecoin. It is developed by the IOG team and powered by COTI, the first enterprise-grade fintech platform. It is backed by ADA and uses SHEN as a reserve coin. For ensuring the stability of Djed, it uses a collateral ratio between 400% and 800% for DJED and SHEN.
According to Djed’s official site, Djed Stablecoin’s price in ADA is around 2.53 ADA, with a circulating supply of around 1.8 Million.
DefiLlama, a DeFi TVL aggregator, recently added Djed Stablecoin on its Stablecoins dashboard.
The Cardano-backed Stablecoin is also listed on two of the cryptocurrency data aggregators, CoinMarketCap and Coin360. At press time, Djed is trading at a price of $1.01 USD with a 24-hour trading volume of $27K, according to Coinmarketcap data.
Djed: The ADA-backed Stablecoin
Djed operates by keeping a reserve of base coins that are ADA, and minting and burning stablecoins and reserve coins. The contract maintains the peg of Stablesoins to a target price by buying and selling stablecoins, using the reserve, and charging fees, which accumulate in the reserve. The ultimate beneficiaries of this revenue stream are holders of reserve coins who boost the reserve with their funds, according to Coinmarketcap.
Djed is the first formally verified Stablecoin protocol. The design and stability properties of Djed uses the formal methods in its programming process. Although, its stability mechanism is based on a collateral ratio in the range of 400% to 800% for $Djed and $Shen. The price fluctuations are offset by Shen, covering shortfalls and guaranteeing the collateralization rate.
It must be noted that the ADA reserve pool is not managed by market makers, but by the users who minted the $Shen reserve coin and then added ADA to the pool. It also provides a decentralized aspect to the $Djed mechanism, while the $Shen holders are incentivized to provide liquidity through fees.
Moreover, $Djed can be over collateralized (up to 8x), the risk of $Djed being unpegged decreases. It means for every 1 $Djed minted, there are 3 to 7 dollars worth of $ADA in the reserve pool.
And if the ratio decreases below 400%, the users will not be able to mint $Djed, and relatively the $Shen holders won’t be able to burn their $Shen. And during the market dip, there is a security blanket for $Djed holders that ensures its sustainability.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2023/02/02/cardano-backed-stablecoin-djed-collected-almost-28m-ada-tokens/