Hey folks,
I have a hypothetical 500,000 ADA.
When I check the swap price on Swapspace - ADA to USDC I get: 192,548 USDC.
When I check the swap price on Minswap - ADA to DJED I get: 33,584 DJED.
Why are the numbers so drastically different? Both assets are supposed to track one US dollar … right?
Am I being obtuse here? What am I not understanding?
Thank you in advance…
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The reason is “slippage”. Any time someone trades in an AMM pool it affects the price proportional to the order amount and liquidity depth of the pool. ( These pools are not so deep yet).
DJED is redeemable to a USD equivalent on DJEDs own app but trading apps never have any peg mechanic, what actually keeps peg on DEXes is a natural market dynamic called arbitrage that organically occurs because you can potentially make money by doing it.
The deeper the pools get and the less friction of the arbitrage routes the better it will be.
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Thanks for the response Sadonicus.
I sent the same question to the help desk over at the Djed.xyz website. One of the guys wrote back that it was a liquidity issue with the hypothetical swap the size of 500,000 ADA. Something about “no more Djed could be minted.” I asked him another question and I’ll post all of his responses here if you like (tomorrow I suppose).
Folks, heads-up, I’m pretty good with computers and I understand blockchain and Cardano reasonably well, I also hold a master’s degree, yet I’m having trouble understanding answers like “arbitrage” and “not enough liquidity.” The protocol either works or it doesn’t: The numbers of DJED and USDC should be the same if one USDC = one USD and one DJED = one USD. Anything less is just excuses. Maybe I’m not understanding something but even misunderstanding is enough for me to walk away.
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Liquidity being the amount of ADA and DJED in the pool, the total value of that pool is only 200k ADA. Any time you swap using DEX pool you are affecting the price. This is how it works and how markets work, when anyone tries to buy a lot of something it makes the price go up, it’s just that in very small markets it’s it’s a lot easier to affect the price.
Liquidity will get larger over time, DJED is stil very new.
So if you want to hypothetically buy a lot of DJED in a small pool the way to do it would be to buy small amounts and let the pool recover between each buy. Liquidity is a real issue, it takes time to build up but I believe it will grow stronger over time.
I would assume that it would be cheaper for larger DJED amounts to mint directly with the DJED protocol but I can’t talk about it in depth as I have not used it myself.
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Understood and thank you again for your response. I’m not in a hurry to make a swap. A couple of days ago I was bored, opened my Eternl wallet and started fiddling with the swap function. I then noticed how low the USD value was compared to doing the same hypothetical swap on Swapspace using USDC. Yeah, your answer makes sense but it’s also letting us know that Djed isn’t ready for prime-time. I wonder if USDA will have the same issue. I can only assume it will.
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My conversation with Tamir is here:
- Note: You’re reading the last response first. Go to the bottom to read the responses in order.
Dear Daniel,
Did you see my last email?
Was your issue resolved? you can now see your balance now?
Yes, you will be able to mint only the available amount based on the protocol liquidity levels and the rest of your ADA will stay in your wallet.
Please note that the contract have 1.5% base fee for every transaction and a 100 ADA operator fee.
Those operator fees should be reduced to 25 ADA in the near future.
Best regards,
Feb 22, 2023, 19:13 AST
Hey Tamir,
Thank you for responding.
Question: One Djed = one USD … right?
In other words, my hypothetical swap would only convert a third of my ADA because Djed isn’t liquid enough?
And the remaining amount of ADA (unswapped) would still be in the wallet?
Do I have this right?
Feb 22, 2023, 04:25 AST
Dear Daniel,
Please ignore my last email since the mintable amount is much larger than what you see.
Sorry for that.
Do you use a multiple address wallet such as Eternl?
If so, please make sure that your funds are sitting in wallet 0 and address o (…/0’/0/0)
Best regards,
Feb 22, 2023, 04:06 AST
Dear Daniel,
Thank you for reaching out.
Based on the reserve ratio, the protocol indicates how much can be minted rather than your entire balance.
In other words, the protocol is not capable of minting more than the amount that you observed.
I hope that clears it up.
Best regards,
Feb 22, 2023, 00:18 AST
Hey folks, I have a question …
I have 500,000 ADA.
When I check the swap price on Swapspace - ADA to USDC I get: 192,548 USDC.
When I check the swap price on Minswap - ADA to DJED I get: 33,584 DJED.
Why are the numbers so drastically different? Both assets are supposed to track one US dollar … right?
Am I being obtuse here? What am I not understanding?
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Folks, I’m going to bottom-line this:
You’ll get a MUCH better deal using Swapspace-to-USDC rather than using DJED’s website swap protocol. Run the numbers for yourself. Plug in your ADA to the djed.xyz website and hypothetically swap it. Do the same in Swapspace. You get much more USDC from Swapspace then you will from DJED … which is total bullshit. We should be getting the BEST exchange rates within our own ecosystem. Someone really needs to look at this.
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I looked at those places and this is the offers I got with 500 000 ADA.
Swapspace: 191 672 USDC
djed.xyz: 190 555 DJED
Coinbase: 194 158 USDT
I agree that the fees are high but I’m not surprised about it. Usually what happens in markets are first movers start with higher fees and then scaling and fee wars kick in and eventually we have a nice market. People are building, lets see who comes up on top at the end.
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Thanks for replying again Sardonicus …
When I ran the numbers I think DJED was behind by about three grand … which is a lot. I live in South Korea so we use Bithumb, and the exchange rates are really favorable assuming you don’t mind receiving Korean won for your crypto. I have to tell you that I was surprised and saddened by these numbers. I hope you’re right about the swap rates improving. To me, the great goal of a “Cardano decentralized ecosystem” sort of died. When a brick-and-mortar, centralized exchange like Coinbase or Bithumb can give us better rates than a software exchange protocol that doesn’t even have to pay taxes (much less, air condition it’s offices) we have an issue here. And saying “we have an issue” is being kind. I really think Cardano users are getting hosed.
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Hey djsjbh, email me… Been 12 years and your emails don’t work!!! Here’s a hint… Deli👍
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