Cardano’s stablecoin, DJED, is a little odd. It’s odd because it’s transparent (for the most part), and it can’t operate like $USDT or the horrible failure that was Terra’s $UST.
Just take a look at the USDT whitepaper and the UST whitepaper.
And now compare those whitepapers to DJED’s whitepaper.
The USDT and UST whitepapers are 15 to 20 pages long and are comparable to an 8th-grade and 10th-grade research paper.
DJED’s whitepaper, on the other hand, is an 85-page long Eisntein-Gandalf-Dumbledore-Quantum Physics-Charles Xavier-Q Continuum-Jedi Master math paper thingy. 🧠
Breaking Down DJED
BTW – DJED is named after the ancient Egyptian symbol djed which means stability. SHEN is named after the ancient Egyptian symbol when, which represents protection, permanency, and eternity/infinity.
DJED’s this next-level stablecoin system built to keep it stable, using a trio of coins: basecoin ($ADA), stablecoin (DJED), and reservecoin (SHEN).
The whitepaper demonstrates DJED’s credibility and seriousness in the stablecoin game, presenting six theorems to support its claims. ✅
- Theorem 1 focuses on the target zone. If the stablecoin’s price goes outside the target zone, peeps will start tradin’ like crazy, and the price will come back in line. This keeps things in check.
- Theorem 2 is about the intervention zone. When the price goes wild, DJED can step in and buy or sell stablecoins to keep it cool.
- Theorem 3 is all about systemic stability. DJED can handle situations where the market’s going nuts, and it’s got the tools to prevent the stablecoin from going off the rails.
- Theorem 4 shows us that DJED’s bank won’t go broke, which is important ’cause you don’t want your stablecoin system to crash and burn. Oh hai TerraUSD.
- Theorem 5 is about bank run prevention. It’s like, “Yo, even if peeps wanna cash out their stablecoins, DJED can handle it without the bank runnin’ out of dough.”
- Theorem 6 says that if the exchange rate between the basecoin and stablecoin remains stable, the equity per reservecoin will continue to increase. This means DJED has a solid strategy for long-term growth.
SHENannigans
So what is the reservecoin protocol, SHEN, used for, and what does it do? This is probably one of the more confusing aspects. 🤔
On one hand, you’ve got the basecoin, ADA, and on the other, you’ve got the stablecoin DJED.
SHEN’s like the glue that keeps everything together. It uses Cardano’s smart contracts to implement the DJED stablecoin system. This way, you get a stablecoin that’s not just stable in value but also transparent, decentralized, and secure.
Here’s how it goes down:
- SHEN’s got a smart contract that issues DJED based on collateral. People put up some ADA (Cardano’s native cryptocurrency), and the contract issues DJED in return.
- The value of the stablecoin is pegged to a stable asset, like the US dollar. So, it’s meant to always be worth around a buck.
- If the market value of the stablecoin starts to drift away from its peg, SHEN’s smart contract adjusts the supply. It either buys back stablecoins or issues more, depending on what’s needed to keep things stable.
- The smart contract also manages the collateral: If the value of ADA goes down, it may require more ADA to be added as collateral, keeping everything safe and sound.
One of the cool features of SHEN is its “dealer-free” design, which means no trusted dealer is required to set things up.
So there you have it, more context on how DJED’s got a solid stablecoin system – but will it work? We probably won’t know until there’s a massive bear market again. 💹