Djed is Dead

Here is a screenshot of the current status:

From this we can easily calculate the true value of each Shen token as follows:

  • According to the page, I can currently burn 1 Djed to receive 3.6555 Ada. This equates to 3,751,021.42 * 3.6555 outstanding Ada owed to Djed holders should they all elect to redeem their Djed for Ada right now. That is = 13,711,858.80 Ada.
  • The base reserves are 42,163,721.3394 Ada. This is the total amount of Ada held in the Djed contract.
  • The net Ada equity in the Djed reserve is therefore this base reserves amount less the amount of Ada owed to all the Djed holders. That is 42,163,721.3394 - 13,711,858.80 = 28,451,862.54 Ada net reserves.
  • But there are 30,391,600.61 outstanding Shen tokens. Therefore the true value of each Shen token is 28,451,862.54 / 30,391,600.61 = 0.936 Ada.

Yet the page will only allow people to mint Shen tokens if they pay 1.015 Ada for each Shen they receive.

The current Djed implementation doesn’t work properly. No sane person would mint Shen tokens currently to pay 1.015 Ada for each when they are only really worth 0.936 Ada each. Therefore nobody will provide more liquidity to the Djed contract at this point.

The screenshot shows that it is not possible to mint Djed tokens (Djed Mintable Amount = 0) at present because net reserves are only 303% which is below the 400% threshold. Similarly, you are also not allowed to burn Shen for Ada.

For the Djed stable coin to work properly, people need to know that they can mint Djed. Furthermore, the real price of Shen has de-pegged from that shown in the Djed contract. If the Djed contract is going to stop working so easily whenever there is any Ada price drop then nobody will want to rely upon it.

I think it would be totally worth it to use Catalyst funding to have IOG properly implement the extended Djed protocol with minimal fees and 100% of these fees going to Shen holders as designed. Then more people might be incentivised to become Shen holders and thereby provide extra liquidity to the Djed contract when the reserve ratio goes low.

It is a shame that Coti’s Djed implementation is broken.


That’s all – including a set minimal price for minting SHEN – part of the concept of Djed, and is also present in Extended Djed. If you want to always be able to mint the stable coin, if you don’t want a minimal price that makes minting the reserve coin undesirable, … you want something else than Djed.

…, which might be a wise choice. By now, I’m convinced that the Djed concept just doesn’t work. Overcollateralisation is just too inefficient. And the risks for reserve coin holders cannot be adequately compensated by profits.

Why throw more money at IOG? They already implemented the abomination that we currently have. COTI seems to not have the Cardano competence to do that. And IOG chose to have COTI “operating” it.


I’ll have to read the paper again. That doesn’t make a whole lot of sense to me. The price of Shen should be a simple calculation. Net Ada reserves divided by number of outstanding Shen tokens. I can’t see how it can be anything different. If the net Ada reserves go to zero then the Shen token must be worth zero. There is no point kidding around, people can see what the smart contract holds.

I don’t know. But someone needs to wake up!!! The current Djed implementation is shiiite!

Someone should build extended Djed properly because I do believe it can work. The fees need to be kept low so I think it probably needs to be a community funded infrastructure type project. I don’t think we can afford an entity like Coti sucking fees from Shen holders who clearly need to be incentivised more.

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Hello @Terminada

Shen can’t have a free floating price because if reserves drop to 100%, then you would be able to mint infinite amount of Shen for free (or nearly free). Here is Shen price formula from the white paper (RC is used as Reserve Coin = SHEN).


Coti fees aren’t the culprit.
When the price hits this parameter bottom all incentive is gone to mint Shen because you can buy it for cheaper from secondary markets. Also, at below 400% you can’t even mint Djed, only sell. This means that protocol is set up to shrink every time these conditions are in place. No change in fees will fix this.

Lets consider these 3 possible states.

  1. Below 400% - there is no incentive to mint Shen because you can get it cheaper at open market
  2. Between 400% and 800% - there is incentive to mint Shen ONLY IF you believe that price of ADA will rise
  3. Above 800% - can’t mint Shen.

As you can see the incentives to mint (or hold) Shen are very limited by protocol design.


Ahh that does make sense. So Coti has set the minimum Shen price to 1.015 Ada.

I was harsh on Coti but it is not their fault. I changed the topic to “Djed is broken”. Then changed again to “Djed is Dead”.

Nobody will buy Shen from the Djed contract but they can buy it from a DEX at it’s real price which should reflect the amount of Ada reserves. In other words, Shen should trade on DEXs at what I calculated (0.936 Ada).

I just looked at SundaeSwap to see the price of Djed is 3.828 Ada and the site says “Below Minimum Delegation”.

This is making me more sad because the adoption is so poor that there really isn’t any liquidity at all. I am now starting to agree with @HeptaSean:

Actually, I can’t see much reason to buy Shen if an Ada price drop of 10% causes it’s real price to depeg from the contract minting price so easily. And Shen holders have no meaningful way to sell with any volume.

This is looking like an Ethereum kindergarten experiment. The only people trading this stuff on SundaeSwap must be crypto degen gamblers.

I am seriously depressed now. How are we going to ever get proper decentralised DeFi???

What should I believe about all the simulation that was said to have been done on Djed during the research stage, before it was implemented???

Nice review. From an incentive standpoint I agree the only way I’m holding the bag on Shen is stake and fee rewards, holding it is not enough. I can go to Indigo and have more control and rewards from iUSD.

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