On Wednesday, May 11th, the founder of the Cardano blockchain took to Twitter to assure his followers that Cardano’s Djed is a safe asset for investors. Charles Hoskinson is no stranger to turbulent times in the crypto ecosystem.
The blockchain geek co-founded Ethereum, launched in 2015, and went further to develop the Cardano blockchain. Charles has experienced multiple crashes in the crypto ecosystem and understands the FUD in investors’ minds.
Commenting on Luna, he said: “The rumors floating around about how Luna collapsed so quickly all converge to the same reality that every DeFi protocol and cryptocurrency face: There is a massive attack surface from hackers to traders. If there is an exploit, someone will find it and break it.”
He further referenced a tweet from Shahaf bar-Geffen, indicating that despite the intense volatility in the crypto markets, Djed coin will maintain its 1:1 peg.
How Djed Will Maintain its 1:1 Peg
Djed is the first stablecoin in the Cardano ecosystem and is set to embrace adoption in the coming weeks. Although Djed is an algorithmic stablecoin like Terra’s UST, the architecture of the token makes it stable amidst a highly volatile market.
Djed’s algorithm is based on a collateral ratio of at least 1:4 and can be up to 1:8. The stablecoin is collateralized with the $Shen token, a reserve coin in the $ADA pool.
The architecture of the $ADA pool for the stablecoin ensures that for every Djed minted, 4-8 $Shen tokens are available in the reserve pool. Should the ratio fall below 1:4, users will be unable to mint Djed, and holders of $Shen will be unable to burn their $Shen tokens. Thus, the algorithm is automatically stabilized to prevent an excessive supply of Djed or a limited supply of $Shen in the liquidity pool.
Following the failure of UST, the Cardano community look forward to seeing the success of its new algorithmic stablecoin.
