Cardano’s Djed Compared to Terra’s UST by Community: Details

Stablecoin

Here’s Why Cardano’s First Algorithm-Based Stablecoin Can’t Collapse Like UST

Cardano (ADA) enthusiast and developer who goes by @nazarcapital on Twitter explained how the additional asset SHEN can prevent DJED from being de-pegged even in hard times.

Why is ADA-SHEN-DJED design better than LUNA-UST?

According to the explanation share per @nazarcapital, the “death spiral” scenario when selling Terra (LUNA) amplified the collapse of TerraUSD (UST) made it impossible to re-establish the UST peg.

With the majority of investors making their exit, UST’s crash to near-zero levels was bound to happen.

Cardano’s stablecoin, Djed (DJED), which is currently in testnet, is backed by ADA, the primary native asset of the Cardano (ADA) protocol. As such, it would be vulnerable to the same “death spiral” problems.

However, to ensure its stability, an additional coin, SHEN, was integrated into its design. If there is not enough ADA to pay out to DJED holders, SHEN bonuses will come to the rescue.

The SHEN asset is also protected from inflation: when the reserve rate reaches 800%, the SHEN minting stops.

DJED keeps its peg amid volatility: test results

The mentioned design was already stress-tested by COTI Network and Input Output Global; even during periods of market volatility and ADA sell-offs, it kept a 1:1 peg to the USD equivalent.

As previously reported by U.Today, the APR review in Anchor Protocol (ANC) triggered the collapse of TerraUSD (UST) and Terra (LUNA) assets.

Djed (DJED), the first-ever algorithmically backed stablecoin on Cardano (ADA), is set to address the major bottlenecks of the stablecoins scene.

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