Cardano News: Cardano Will Launch Stablecoin DJED in January 2023
By:C, FionaLatest Cardano News
Cardano blockchain recently announced that it will launch the stablecoin DJED on the Cardano Mainnet in January 2023. With the current state of the market, this new launch could prove to bring some positive impact to the community. But if you are wondering what is Djed and how it works, don’t worry this article will help you find it out.
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What Is DJED Stablecoin and How It works?
According to the official blog by COTI: Djed: Frequently Asked Questions, “$DJED is an over-collateralized algorithmic stablecoin that is backed by $ADA and uses $SHEN as a reserve coin.” Minting of $DJED can be done by interacting with the smart contract and sending $ADA to that particular address.
Let’s look at a simplified example to better understand this. Let’s say hypothetically, the ADA token is valued at $2 and the DJED token is at $1. So in order to mint 1 DJED, the user would have to send 0.5 ADA to the smart contract to receive the 1 DJED back. This process can then be repeated to mint more DJED.
The extra reserves for the pool are ensured by the SHEN coin. SHEN in this scenario acts as a reserve coin and is not pegged to any specific asset.
The SHEN token basically provides for the smart contract enough ADA to make up for its fluctuation, ensure a stability of price, and make it a point that the collateralization rate is guaranteed.
As long as the reserve ratio is in the range of 400%-800%, the minting of DJED and SHEN tokens will be permitted.
If the ratio falls out of this range, certain mint/burn procedures will not be allowed to take place.
Djed Trading Fees
The mint and burn fees for the DJED and SHEN tokens will be charged in $ADA and will be a part of the equity pool. A great part is that to incentivise users, a part of this equity pool will be distributed to the SHEN holders too. The operating fees which also will be paid in ADA, are going to be taken from the initial deposit and cooperating prices. According to the network, these fees will be then changed to “$COTI and streamlined into the COTI Treasury to be distributed as rewards to COTI users”.
The fee details are as follows:
- DJED mint & burn fee: 1.5%
- DJED operational fee: 0.5%
- SHEN mint fee: 0.2%
- SHEN burn fee: 0.5%
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