Shen is Djed’s reserve coin, which aims to guarantee the collateralization rate and the peg of the stablecoin. By minting $Shen, its holders provide the service of stability to $Djed users. In order to do so, they won't be able to burn $Shen for $ADA for as long the Reserve Ratio is below 400% because stablecoin users have priority to burn their stablecoins into a stable USD equivalent value paid in $ADA from the Reserve. The smart contract also won’t allow the purchasing of $Shen once a Reserve Ratio gets to 800% in order to avoid too much risk or rewards. By trading $Shen, users can contribute to the stablecoin mechanism by providing the appropriate liquidity to maintain a sufficient peg ratio. Having a reserve coin is crucial for the success of the stablecoin.
By utilizing the reserve coin, fees will be charged and entered into a transaction pool facilitated by the underlying stablecoin. $Shen holders then get a share of this transaction pool as an incentive for their participation in maintaining the stablecoin peg ratio.
Reserve Coins are digital tokens that maintain the algorithmic peg of stablecoins. By trading Reserve Coins, users can contribute to the stablecoin mechanism by providing the appropriate liquidity to maintain a sufficient peg ratio. By utilizing a reserve, base fees can be charged, collected, and pooled for transactions facilitated by the underlying stablecoin.
Reserve Coin holders then get a share of this transaction pool as an incentive for their participation in maintaining the stablecoin peg ratio. Before the launch of Djed, we will be implementing a Reserve Coin that will serve this function of maintaining Djed’s peg and liquidity stability. We have provided some details on this below.
