Djed maintains its peg through an algorithm that requires a collateral ratio between 400% and 800% for both $Djed and $Shen. Shen absorbs price volatility in ADA, covering any deficits to ensure the collateralization rate remains intact.
Rather than relying on market makers, the ADA reserve pool is managed by users who mint $Shen and contribute ADA, giving the $Djed system a decentralized structure. Fee incentives encourage $Shen holders to supply this liquidity.
Because $Djed can be over-collateralized by up to 8x, the likelihood of it losing its peg is reduced. Specifically, every 1 $Djed minted is backed by 3–7 dollars worth of $ADA in the reserve. If the ratio drops below 400%, minting new $Djed and burning $Shen are both disabled. This restriction acts as a safety net for $Djed holders during market downturns, supporting sustainability. Additionally, the issuance of new $Shen is monitored to keep balances stable and guarantee sufficient ADA remains in the pool to cover the dollar value of $Djed upon burning.