The long-awaited launch of the Djed stablecoin on Cardano’s (ADA) network is here, and it promises to offer financial freedom through a more inclusive economy. IOG, in partnership with Coti, developed a stablecoin that aims to maintain its value close to $1. This is done by backing each coin with reserves of cryptocurrencies and fiat currencies.
Djed has a collateral requirement of 400% to protect against market fluctuations. Avoiding a collapse similar to the Terraform Labs stablecoin disaster of 2022, in which billions of dollars were lost from cryptocurrency markets within days.
Djed will rely on the stability of its SHEN asset.
Get to know SHEN
SHEN adds stability to the Djed stablecoin by reinforcing its reserve rate. When you buy Djed tokens, the smart contract automatically converts your ADA into several stablecoins; this makes them a liability for the issuer.
However, the value of ADA could fluctuate and result in a loss when selling it back to the smart contract. SHEN tokens provide additional equity and reserves compared to an initial deposit of ADA—which can decrease or rise over time depending on market conditions. The total reserve index is calculated by multiplying the total amount of Djed held in reserves by the value assigned to each unit.
In addition to maintaining Djed’s parity with the dollar, users can earn rewards by buying and selling SHEN. The price of SHEN is tied to the value of ADA—if it increases, so will the cost of SHEN; if it decreases, both fees will go down accordingly. In addition to stabilizing the SHEN protocol with their transactions, users can earn rewards by participating in the market.
The decentralized nature of Djed and other stablecoins based on blockchain technology contributes to their transparency. This makes them less prone to censorship than centralized assets controlled by third parties.
It must be noted, however, that stablecoins such as Djed offer protection against price fluctuations but are still subject to external factors—and may fluctuate in value accordingly. Investing in any financial asset can be risky, so carefully consider the potential downsides.
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