The Cardano-based Djed stablecoin (DJED) has attracted over 27 million ADA tokens as reserves in less than a day after its launch.
Djed went live on Tuesday and had a collateral backing ratio of 600% at the time of writing.
Parabolic Growth In Reserves
Cardano-based Djed (DJED) stablecoin is quickly attracting millions worth of ADA in its reserve. The stablecoin has managed to attract over 27 million ADA tokens as backing. This figure was reached less than a day after the launch of the stablecoin. Data from Djed’s official website has shown that the stablecoin has received a parabolic rise in its reserve assets, meaning its overcollateralization is going as planned. At the time of writing, Djed’s reserve ratio is nearly 600%, meaning each stablecoin is backed by six times its value.
According to the stablecoin’s website, there are just over 1.7 million tokens in circulation. These are backed by over 27 million ADA, worth around $10 million in its reserve.
“DJED is an overcollateralized stablecoin that uses exogenous collateral to ensure stability. The protocol is backed by 400%-800% overcollateralization and is guaranteed by its reserve coin, SHEN. The stability of DJED is based on overcollateralization, which eliminates the need for trust in a governance protocol as seen in algorithmic stablecoins.”
Highly Overcollateralized And Stable
The Djed stablecoin has been jointly developed by Cardano code maintainer IOG and the COTI Network, a layer-1 blockchain, and launched earlier during the week. The stablecoin would be backed by other tokens and would require between 400% to 800% in collateral to be posted before it is issued to a user.
The overcollateralization enables Djed’s value to be extremely stable during periods of market stress and volatility and was implemented keeping in mind the terraUSD debacle which saw a spectacular collapse and lost 99% of its value in May.
Significant Changes Before Launch
Before the official launch of Djed, the COTI Network implemented several changes to the stablecoin. Some of the changes include transitioning it into a multi-chain network that can support private payment networks and also decreasing deposit fees by 50%. The team at COTI Network explained that these changes would help quicken the adoption of digital assets, especially as a payment method for goods and services. The team released a statement stating the following,
“This launch signifies a massive step for the crypto industry, as well as COTI, as the [upgrade] will increase the growth of the widespread adoption of crypto payments for enterprises that are yet to adopt crypto payment solutions.”
Djed is expected to attract significant liquidity and interest from investors and users, thanks to its overcollateralized mechanism, which would also be beneficial to Cardano’s decentralized finance (DeFi) market. DeFi projects such as Fluid, based on Cardano, have already integrated the stablecoin as liquidity against loans. DeFi exchange MuesliSwap has also stated it is targeting an annualized yield between 10% to 25% for Djed holders.
The Shen Token
The Shen token is the Djed stablecoin’s reserve currency, sharing its collateral pool, and can be minted by locking up ADA. The shared collateral pool allows Djed to maintain collateralization between 400% and 800%, even if there is volatility in the price of ADA. When the collateral goes below 400%, the smart contract will block users from burning any more Shen tokens. Similarly, when the collateral goes above 800%, the smart contract will prevent the minting of new Shen tokens. Furthermore, Shen token holders are also incentivized to stake their tokens, following which they are eligible to receive mint and burn fees, farming rewards, and delegation rewards.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
