$Djed’s algorithm is based on a collateral ratio in the range of 400%-800% for $Djed and $Shen. So what will happen if the ratio decreases below 400% or increases above 800%? Read below to find out.
The reserve ratio is under 400%:
In this case, the smart contract will prohibit minting any new $Djed. In addition, $Shen holders won’t be able to burn their $Shen at any time while the reserve ratio is below 400%.
When the reserve ratio is under 400%, only 2 things are allowed:
- $Djed holders can burn their $Djed and redeem them for $ADA, which increases the reserve ratio.
- $Shen investors can mint additional $Shen in order to increase the reserve ratio.
What happens if the Reserve Ratio is above 800%?
In this case, the smart contract will prohibit minting any new $Shen. Burning $Shen is allowed and will decrease the reserve ratio.
In the coming days, we will publish more information about Djed, including examples of what will happen when the market fluctuates.
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