The decline coincides with falling cardano (ADA) prices.
Djed reserve ratio falls to 300 percent.
Djed is a stablecoin issued by COTI, and according to the issuer, Djed should be collateralized between 400% and 800% by default.
Due to market volatility and declining ADA prices, the collateralization ratio of Djed is now 3X, which is below the optimal range of 4X to 8X.
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The most recent update on the official website for Djed indicated that the stablecoin was supported by a reserve of 38,108,555.96 ADA. This would then permit the minting of 10,175,632,28 DJED.
This reserve pool of over 38 million ADA is comprised of ADA fees sent to the contract pools during the minting of Djed or SHEN, the reserve coin that ensures the stability of the Djed stablecoin.
Despite this contraction, Djed has not depegged and continues to monitor USD, with ADA providing the necessary cushion.
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On June 11th, according to observers, each Djed is trading at $1.02 against the USD, with a circulating supply of $3,340,007.
Protocol modifications
There are more reports that users were unable to mint Djed at $1 in decentralized exchanges, the stablecoin is adequately supported, and users can redeem their Djed for other assets.
When the reserve ratio declines below 4X the present level, the protocol prohibits the creation of new Djed. Similarly, SHEN holders cannot exchange their tokens for ADA, but they can mint additional SHEN to enhance the reserve ratio. Moreover, holders of Djed can exchange their tokens for ADA, thereby increasing the reserve ratio.
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Djed was released on Cardano's mainnet at the end of January 2023. The coin was designed to be overcollateralized as an algorithmic stablecoin backed by ADA and fueled by COTI. In addition to the 400% to 800% ADA overcollateralization, Djed is assured SHEN.
The overcollateralization was intentional, and IOG stated in their whitepaper that the goal is to eliminate the need to trust a governance token, as is the case with MakerDAO and other algorithmic stablecoins. MakerDAO issues DAI but has a governance token, MKR, which functions as the lender of last resort.
