## What are Reserve Coins?


In simple terms, 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. 

## What is Shen (SHEN)?

Continuing with the ancient Egyptian theme, we picked Shen as the name for Djed’s Reserve Coin. The Shen is a symbol of both royalty and symmetry. It has a deep connection with infinity, eternity, protection, and completeness given its circularity.

During our brainstorming sessions, we found this name to convey the characteristics and properties of Djed’s Reserve Coin appropriately.

By buying and selling Shen, users are able to maintain Djed’s USD currency peg while earning a share of transaction fees in the reserve pool. Since the Reserve Coin is a tradable asset, holders can also profit from the short-mid term price fluctuations as an added incentive.

## What Is Djed (DJED)?

Djed is the first over collateralized crypto-backed algorithmic [stablecoin](https://coinmarketcap.com/alexandria/article/what-is-a-stablecoin) contract on the Cardano network. It operates by keeping a reserve of base coins (ADA), and minting and burning stablecoins and reserve coins. The contract maintains the peg of stablecoins to a target price by buying and selling stablecoins, using the reserve, and charging fees, which accumulate in the reserve. The ultimate beneficiaries of this revenue stream are holders of reserve coins, who boost the reserve with funds while assuming the risk of price fluctuation.

### Who Are the Founders of Djed?

Djed [research paper](https://eprint.iacr.org/2021/1069.pdf) was written and developed by the IOG team (Joachim Zahnentferner,Dmytro Kaidalov,Jean-Frédéric Etienne,Javier Roberto Diaz) and is powered by [Coti](https://coinmarketcap.com/currencies/coti/).



### What Makes Djed Unique?

DJED is the first formally verified stablecoin protocol. The use of formal methods in the programming process has greatly contributed to the design and stability properties of Djed. Using formal techniques, the properties are proven by mathematical theorems:

*Peg upper and lower bound maintenance: the price will not go above or beyond the set price. In the normal reserve ratio range, purchases and sales are not restricted, and users have no incentive to trade stablecoins outside the peg range in a secondary market.

*Peg robustness during market crashes: up to a set limit that depends on the reserve ratio, the peg is maintained even when the price of the base coin falls sharply.

*No insolvency: no bank is involved, so there is no bank contract to go bankrupt.

*No bank runs: all users are treated fairly and paid accordingly, so there is provably no incentive for users to race to redeem their stablecoins.

*Monotonically increasing equity per reserve coin: under some conditions, the reserve surplus per reserve coin is guaranteed to increase as users interact with the contract. Under these conditions, reserve coin holders are guaranteed to profit.

*No reserve draining: under some conditions, it is impossible for a malicious user to execute a sequence of actions that would steal reserves from the bank.

*Bounded dilution: there is a limit to how many reserve coin holders and their profit can be diluted due to the issuance of more reserve coins.


### Related Pages:

Learn more about Djed algorithmic stable coin [here](https://iohk.io/en/blog/posts/2021/08/18/djed-implementing-algorithmic-stablecoins-for-proven-price-stability/)

Learn more about Djed and Shen mechanism [here](https://www.youtube.com/watch?v=Dq_1DOrsXGU)


New to cryptocurrency? Find all the information you need with [Alexandria](https://coinmarketcap.com/alexandria/categories/crypto-basics), CoinMarketCap’s dedicated education resource.


### How did Djed manage to keep its peg?

Djed’s algorithm is based on a collateral ratio in the range of 400%-800% for $Djed and $Shen. ADA prices fluctuations are offset by Shen, covering shortfalls and guaranteeing the collateralization rate.

The ADA reserve pool is not managed by market makers, but by users who mint the $Shen reserve coin and add ADA to the pool. This provides a decentralized aspect to the $Djed mechanism. $Shen holders are incentivized to provide liquidity through fees.

As $Djed can be over collateralized (up to 8x), the risk of $Djed being unpegged decreases. This means that for every 1 $Djed minted, there are 3–7 dollars worth of $ADA in the reserve pool. If the ratio falls below 400%, users will not be able to mint $Djed, and $Shen holders won’t be able to burn their $Shen. So in the event of a market dip there is a security blanket for $Djed holders that ensures its sustainability. The minting of new $Shen is also supervised in order to maintain the balances stabilized, and ensure there will always be enough ADA in the pool to provide a dollar equivalent value to the $Djed when burning it.


### Where Can You Buy Djed (DJED)?

You can mint DJED and SHEN directly from its [platform](https://djed.xyz/) or on any Cardano top DEXs. 

New to crypto? Read our [easy guide](https://coinmarketcap.com/how-to-buy-bitcoin/) to buying Bitcoin and other cryptocurrencies."

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