Find out how Shen helps Djed preserve parity with U.S. greenback by way of its Reserve Coin position
The introduction of nonsynthetic stablecoins on the Cardano (ADA) community has been extremely anticipated, and the wait has come to an finish with the launch of Djed, a stablecoin developed in partnership between Coti and IOG. This decentralized stablecoin goals to keep up its worth near $1 by way of the usage of cryptocurrency reserves.
To make sure stability in a risky cryptocurrency market, Djed has a minimal collateral requirement of 400% of its issued worth. This substantial cushion of collateral protects in opposition to market fluctuations, avoiding a state of affairs just like the Terraform Labs stablecoin collapse in 2022 that resulted in billions of {dollars} being misplaced from the cryptocurrency market in only a few days.
The steadiness of Djed will likely be supported by means of an asset often called SHEN.
Get to know SHEN
SHEN reinforces the reserve fee of Djed’s sensible contract, offering added stability to the stablecoin. When buying Djed, the sensible contract routinely converts the deposited ADA into the stablecoin, turning it right into a legal responsibility.
Nevertheless, the worth of ADA can fluctuate, doubtlessly leading to a loss if the token is bought again to the sensible contract. That is the place SHEN steps in, offering further fairness and reserves in comparison with the preliminary deposit of ADA. The token serves as an indicator of the steadiness of the reserve index, with the next reserve index offering higher safety for Djed.
Along with sustaining Djed’s parity with the greenback, customers can earn rewards by shopping for and promoting SHEN. The value of SHEN is tied to the worth of ADA, which means that if the worth of ADA will increase, so does the worth of SHEN, and vice versa if the worth of ADA decreases. By taking part out there for SHEN, customers cannot solely assist to stabilize the protocol but in addition earn further rewards.
The decentralized nature of Djed and different stablecoins prefer it, primarily based on blockchain know-how, contributes to their transparency, as all transactions are publicly recorded and verifiable. This makes them much less liable to censorship in comparison with centralized, third-party managed secure property.
Nevertheless, it is very important notice that there are nonetheless dangers related to stablecoins comparable to Djed. Whereas it provides safety in opposition to value fluctuations, it might probably nonetheless be impacted by exterior components which will have an effect on its stability. As with every funding, it’s essential to train warning and totally perceive the potential dangers concerned.