What Is SHEN and Where Does It Fit Into The Cardano Eco System?
The important take on this is that there is no human intervention running this algorithmic stablecoin contract. This contract is based on SIGMA/USD which has stayed stable over time and has never lost it's peg.
Next month Cardano is launching their Stablecoin DJED which is an over collaterized stable coin by as much as 400%-800%. This stable coin is run without human intervention as this is all done by a smart contract. I thought I would take some time to explain as an investment what opportunities there are as they are not that obvious.
I am hoping I have dumbed this explanation down enough as that is how I understand certain things that are made to be over complicated when they are not. Understanding how it works is the key to unlocking the potential on offer.
In January investors will deposit ADA into the smart contract to mint SHEN and only once the 400% is reached can DJED be minted. SHEN is the security token for DJED allowing for the minting and burning of the Cardano stablecoin DJED. This is going to be a fun investment like no other as the smart contract will create many benefits for those that hold SHEN.
This is where it gets interesting as once the 800% threshold is achieved you cannot create any more SHEN. You can burn and create DJED, but SHEN is now on hold. This is why getting in early will have many advantages and one I don't want to miss out on. You can imagine firstly how much ADA is going to be tied up in this stablecoin when 8 x is achieved. For 150 Million DJED to be created one would need $600 million worth of ADA in the pool which could rise to $1.2 Billion worth of ADA very quickly. These figures are just an example as there is no limit where this can go besides running out of ADA.
Quick summary 0-8x you can freely mint and burn SHEN, over 8 x you cannot mint more SHEN. DJED can always be burned for ADA as it is over collaterised so the funds are always there.
Rewards And Incentives For Holding SHEN
This is the important part of the post as the first part was just an introduction to try and explain how SHEN fits into this eco system.
All the fees from the burning and mint process for SHEN go to Shen holders in the form of an APR which is adjusted constantly. The prediction is expected to be around 10% APR per annum. Remember this value is in ADA as ADA is used to create SHEN. On top of this you receive the staking rewards for holding SHEN in the pool which for example sake lets say 3-5% now you are somewhere around 13-14% APR. This doesn't end there however as there are DEX's that require SHEN which you can support earning more APR which would be another 10-15% depending on which DEX you choose to support. Suddenly you are earning 25-30% APR per annum for holding SHEN.
The most exciting bit is this part as DJED is valued at $1 so currently you would need nearly 4 ADA (26c) to create 1 DJED. Thinking long term when ADA is for instance $2 you would need 0.5 ADA to create 1 DJED. The extra ADA used to create DJED as that is in the smart contract and remains there now is given to SHEN holders so in theory SHEN could be seriously lucrative and definitely an investment to get involved with.
The only downside is if the contract drops below 4 x then you cannot burn your Shen for ADA and are stuck until more liquidity flows in. I see that as a small risk as this is going to take off and be very popular. This could be the best investment of 2023 quite easily with what is on offer. Getting in early is what is going to make the biggest difference and buying ADA now ready to stake in January. The ADA price will see an increase due to demand buying u the token in order to stake into the SHEN/DJED protocol.
I recommend watching the video for those that are interested and going to 13.21 for the benefits of SHEN. Shen video
DJED as a stablecoin is going to be big (over 40 partnerships already) which could easily create a supply shock due to demand. Where the price of ADA will be in 2 or 3 years from now is anyone's guess. As a SHEN holder the priority is to get in early whilst ADA is "cheap".
For those that want to play around with this please visit DJED TOOL and learn about how to get involved.
For those that hold COTI in the COTI Treasury this is a win win scenario as they receive fees from the mint and burn of DJED. Having SHEN and COTI as investments could turn out to be very lucrative. Please DYOR as this is what Ii am doing and you need to understand what you are getting involved with as there is risk in nay investment.