Data shows that less than a day after its launch, the overcollateralized stablecoin DJED (DJED), based on Cardano, has attracted more than 27 million Cardano ADA tokens as backing. Cardano’s IOG maintains the code, and Coti, a layer 1 blockchain, has collaborated to create the widely anticipated djed stablecoin. Due to this overcollateralized mechanism, the value of the djed would remain stable even in times of market turmoil, avoiding the fate of terraUSD, the algorithmic stablecoin tied to the luna token of the Terra system, which saw its value drop by over 99% in May.
As of the date this article was written, Djed’s reserve ratio was roughly 600%, suggesting that the value of one djed is supported by a total of six times that amount in ADA. There is over $10 million worth of djed locked in ADA at today’s prices. Liquidity for the young ecosystem may be boosted if holders of Cardano’s ADA cryptocurrency staked their coins to create djed stablecoins, the reserve token designed to support djed’s stability.
Djed will be collateralized with other tokens, with a collateral value of 400% to 800% being required before issuance. As more djed-enhanced Cardano-based applications become available, customer demand for shen may increase, leading to a price spike in the coming weeks. There are 1.7 million djed tokens in circulation, while there are 20 million shen tokens in circulation, each worth 38 cents. Because of the overcollaterized mechanism of the djed tokens, it is anticipated that they will attract liquidity and interest from investors. This may be to the benefit of Cardano’s decentralized finance (DeFi) market, which is currently valued at $91 million.
Predictions for the Djed Stablecoin on the Cardano Blockchain
Following Terra Luna’s collapse last year, the Cardano network has introduced a decentralized stablecoin to the cryptocurrency market. According to Djed’s website statistics, the stablecoin’s reserve assets have increased exponentially, indicating that over-collateralization is proceeding as expected. Each Djed stablecoin is backed by roughly six times its value in reserves at the time of writing. In light of this news, the price of ADA has increased by about 2.2 percent, currently sitting at around $0.381992 per coin.
Meanwhile, regulators are trying to stop further progress in decentralized stablecoins, thus the Djed stablecoins may not be offered in the United States market. Furthermore, both Circle’s USDC and Tether’s USDT are subject to extensive government regulation and auditing. Djed (DJED), a stablecoin built on Cardano, is rapidly amassing millions of dollars worth of ADA. There are now more than 27 million ADA tokens backing the stablecoin. This milestone was accomplished in fewer than 24 hours after the stablecoin went live.
The website for the stablecoin indicates that there are slightly more than 1.7 million tokens in use. These are backed by a reserve of about 27 million ADA, now worth about $10 million. To ensure stability, DJED uses external collateral in addition to its reserves. The reserve coin, SHEN, guarantees the protocol and provides 400% to 800% over-collateralization. DJED’s stability is achieved through over-collateralization, unlike algorithmic stablecoins where faith in a governance system is required.
Extremely Overcollateralized and Stable
Djed’s over-collateralization makes its value exceptionally resilient to fluctuations in the market; this was done in light of the terraUSD fiasco, in which the currency lost 99 percent of its value in a single day back in May. This week saw the release of the Djed stablecoin, a product of a collaboration between Cardano code maintainer IOG and the layer-1 blockchain COTI Network. Tokens other than the one being used to support the stablecoin would need to be placed as collateral in an amount equal to 400% to 800% of the stablecoin’s value.