Yesterday, Cardano’s own stablecoin, Djed (DJED), was launched after more than a year of development. After 24 hours the total value locked (TVL) has already passed $10 million. That is the amount that users have locked into the protocol. This is evident from data from decentralized finance (DeFi) analytics platform DeFillama.
It’s alive!
After a year of waiting, Djed is finally here. The Cardano network immediately saw a major change. DeFi activity has surged over the past 24 hours by over 20%. The share price of ADA also saw a sharp increase of 4%.
Yesterday we already discussed that Djed is covered for 400% at all times. So for every dollar of Djed, $4 of reserve is maintained. This reserve consists of Cardano’s native token, ADA, and SHEN, the special reserve token of Djed.
Currently, Djed has a circulation of $1.7 million. SHEN’s supply is over $20 million. The reserve can therefore never fall below 400%. This ensures that the link with the dollar is maintained at all times. When the reserve falls below 400%, users will only be able to play Djed burn and SHEN te mint. If the reserve exceeds 800%, this mechanism is reversed.
Algorithmic or overcollateralized stablecoin?
This automatic mechanism makes Djed according to the developers a algorithmic stablecoin, the mechanism is in fact supported by an algorithm. The last project that tried to realize such a stablecoin was Terra (LUNA), and we all know how that turned out by now. The mechanism behind Djed in combination with the large reserve should prevent such a fiasco.
There is a lot of ambiguity about the term ‘algorithmic stablecoin’. This leads to discussions, especially around the launch of Djed. COTI, the company behind Djed, prefers to call the stablecoin a overcollateralized stablecoin. According to COTI, algorithmic stablecoins are mostly undercollateralized and are backed by tokens that have no other function. In contrast, Djed is covered for at least 400%. In addition, this is done, among other things, by ADA, a token that also has its own functions.
That may sound very complicated, but as far as Djed is concerned, the stablecoin seems to be an immediate success in the first 24 hours.