# Overcollateralization DJED uses exogenous collateral (ADA). This means that the collateral that backs DJED, ADA, has its own utility (its primary use-case is separate from the Djed stablecoin project), and is completely independent of the Djed protocol. ADA is used to buy DJED's reserve coin SHEN. DJED is overcollateralized by 400% to 800%, this means that it has 4 to 8 times more underlying value in the form of SHEN (that is purchased with ADA) backing it than the total sum of DJED minted. Algorithmic stablecoins on the other hand are usually only partially collateralized or undercollateralized. The stability of DJED is based on this overcollateralization and not on trust in a governance token. {% embed url="" %} {% hint style="info" %} For more deatiled information please go to and . {% endhint %} --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://faq.coticommunity.com/djed-and-shen/djed/overcollateralization.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.