What is JustStable?
If you read the name of the project and immediately thought about Justin Sun, then you are right! (You will see a recurrent theme with just about every project on TRON). Disclaimer: His Excellency doesn't hold a stake in the project and any resemblance in name is just for marketing purposes.
JustStable was launched in 2020, making it the first native stablecoin on Tron. JustStable is part of a bigger DeFi ecosystem called JUST Finance. The platform launched has a suite of services such as borrowing, lending and bridging. JUST has the biggest share of TVL on Tron network with around $3B locked. JustStable comes second with $1B locked.
DeFi on Tron is well and alive thanks to these two products. So, if you are looking to add another stablecoin to the bucket besides USDT, USDC, and USDD, JustStable is the right option – more than 450,000 holders agree.
Decentralization is one of the first tenets of a resilient crypto ecosystem. The idea is to remove intermediaries and give full control to the token holders. While TRON's decentralization is debatable, JustStable offers a clearer image of how decentralized it is.
First of all, the project has its own governance mechanism where JST token holders can adjust the risk parameters and even vote to change the governance system itself. Any TRON account can deploy his own smart contract and ask the community to vote on his proposed change. The rule is that the account with the highest number of votes has permit to modify variables of JUST internal system governance.
A possible attack vector can be a malicious actor buying JST tokens to increase his voting power. Although rare, these kind of attacks represent a major threat if left unchecked. For this reason, the JST tokenomics have been designed to equally distribute tokens among users, the team, and seed investors.
The rest of the tokens are locked in the treasury where they can be allocated for incentives and partnerships. The governance mechanism of JustStable doesn't mention a veto system, or special prerogatives for the core team. As the protocol grows, the community can improve their governance system.
Secondly, JustStable is accessible to anyone. With no KYC requirements, getting your hands on JustStable to transact on the Tron blockchain is a breeze. You can choose to buy USDJ off the market or mint your own USDJ using the TRX token.
To this date, JustStable has never been hacked, although, their stablecoin has deviated from the $1 peg multiple times. We will explain how JustStable maintains its peg in the next section.
How does JustStable work?
The mechanics of USDJ are based on the collateral debt position (CDP) used by MakerDAO. A CDP is a type of smart contract used in decentralized finance (DeFi) platforms that enables users to lock up collateral in exchange for a loan in a stablecoin. In the context of JustStable, a CDP allows users to create new JustStable tokens by depositing TRX into a smart contract as collateral, and then taking out a loan in JustStable tokens.
When users want to mint JustStable tokens, they must deposit TRX into the smart contract in exchange for an equivalent amount of JustStable tokens. These tokens can be redeemed for TRX at any time, as long as the user holds the minimum required amount of collateral.
The algorithmic system used to manage the supply of JustStable tokens in circulation involves the use of an oracle that regularly updates the price of JustStable relative to the US dollar. If the price of JustStable deviates from the 1:1 peg, the smart contract automatically adjusts the supply of JustStable tokens in circulation to bring the price back into line with the peg.
If the price of JustStable is above the peg, the smart contract mints more JustStable tokens and sells them for TRX. If the price of JustStable is below the peg, the smart contract buys back JustStable tokens and burns them, reducing the supply and increasing the value of each token.
To effectively manage potential risks, USDJ is being maintained by the JST holders, who are able to adjust the risk parameters. JST holders have several parameters they can work with:
JustStable Debt Ceiling
Debt ceiling is the maximum amount of debt that can be created by CDP. Once the debt ceiling is reached, it becomes impossible for CDP to create new USDJ unless existing CDPs are closed.
The USDJ debt ceiling is important because it helps to prevent the system from becoming over-leveraged and at risk of default. If there were no debt ceiling, users could theoretically generate an unlimited amount of USDJ tokens by locking up TRX as collateral. This could lead to a situation where the amount of USDJ in circulation significantly exceeds the amount of TRX that is locked up as collateral, which would create a risk of default if the value of TRX were to fall sharply. Unlike the US Treasury, JustStable actually has a debt ceiling.
JustStable Liquidation Ratio
The liquidation ratio is another parameter that can be adjusted by the JST holders. It represents the minimum level of collateralization that is required to ensure the stability of the system.
If the value of the locked-up TRX in a CDP falls below the liquidation ratio, the CDP is at risk of being liquidated. In a liquidation event, the smart contract that governs the CDP will automatically sell a portion of the locked-up TRX collateral to repay the USDJ debt, and the remaining TRX will be returned to the user. The amount of TRX that is sold in a liquidation event is determined by the liquidation penalty, which is set by the DAO and is typically around 13%.
JustStable Stability Fee
The stability fee on JustStable is a variable interest rate that is charged to users who hold a collateralized debt position (CDP) and mint USDJ stablecoins. The stability fee is priced by USDJ and repaid only in JST.
The DAO votes on the stability fee, taking into account market conditions, supply and demand for USDJ, and other factors. If the stability fee is set too high, it may discourage CDP creation and lead to a decrease in the supply of USDJ. If the stability fee is set too low, it may encourage over-leveraging and increase the risk of default.
The stability fee serves two purposes. First, it incentivizes users to maintain a healthy collateralization ratio for their CDPs, as the stability fee will increase if the ratio falls below a certain level. This helps to prevent the system from becoming over-leveraged and at risk of default.
Second, the stability fee is used to fund the JustStable ecosystem. The JST paid as stability fees is used to buy back and burn JST tokens, which helps to maintain the value of JST and align the interests of the governance community with those of USDJ users.
JustStable Penalty Ratio
The penalty ratio on USDJ is a parameter that determines the penalty that is imposed on a collateralized debt position (CDP) if its collateralization ratio falls below the liquidation ratio. The penalty ratio is set by the JustStable DAO and is currently set at 13%.
If a CDP's collateralization ratio falls below the liquidation ratio, the smart contract governing the CDP will trigger a liquidation event. In a liquidation event, a portion of the CDP's collateral is sold to repay the USDJ debt, and the remaining collateral is returned to the user. The amount of collateral that is sold is determined by the liquidation penalty, which is calculated as a percentage of the amount of USDJ debt that is outstanding.
The penalty ratio is important because it serves as a disincentive for users to allow their CDPs to become under-collateralized. If the penalty ratio were too low, users may be more willing to take risks and maintain lower collateralization ratios, which could increase the risk of defaults and systemic instability. By imposing a penalty on under-collateralized CDPs, the USDJ ecosystem can incentivize users to maintain a healthy collateralization ratio and ensure the stability of the system.
How to make money on JustStable?
JustStable offers numerous ways to make profits within the TRON DeFi ecosystem. Although it's a stablecoin, users can leverage its mechanics and the rich DeFi protocols on TRON to multiply their profits. Now that you understand how the stability mechanism of USDJ works, here's how you can help rebalance the peg and make money off it.
JustStable Arbitrage
When you mint USDJ using TRX as collateral, you have created a collateralized debt position. By doing so, you can borrow USDJ at a stable interest rate, which can be lower than other borrowing options. Additionally, you maintain exposure to TRX throughout the process.
Here comes the interesting part. USDJ relies on an arbitrage mechanism to maintain its price stability. If the market price of USDJ deviates from the target price of $1, the arbitrage mechanism can be used to bring the price back into alignment.
The process works as follows: If the market price of USDJ falls below $1, users can buy USDJ on the open market and use it to repay USDJ debt in their CDPs. This reduces the supply of USDJ in circulation and increases the demand, which helps to push the price back up towards the target price of $1. If the market price of USDJ rises above $1, users can create new CDPs and mint new USDJ stablecoins. This increases the supply of USDJ in circulation and reduces the demand, which helps to push the price back down towards the target price of $1.
So, the basic idea is to create a CDP when the price of USDJ is below $1 and repay the debt when the price rises back up to $1. By doing so, you can potentially earn a profit from the difference between the market price and the target price of USDJ. However, users have to maintain a healthy collateralization ratio to avoid liquidation if the price of the collateral (TRX) drops.
To create a CDP position on JustStable, follow these steps:
1. Open the JustStable app
2. Click the button “Create CDP” in the middle
3. Enter the amount of TRX to be staked, and the amount of USDJ you would like to generate (keep in mind that the collateralization ratio should be no less than 150%)
4. Click “Stake to generate USDJ”
5. Approve the transaction
6. Done!
According to the JustStable team, it is recommended to set the collateralization ratio as high as you can as to not worry about getting liquidated. in order to profit from the arbitrage opportunities it is essential that you can sell your USDJ when the peg is above $1. Don't worry, you can add more collateral to your position anytime.
Price Prediction for JustStable — Can it hit $1000?
Buying and hodling JST — the native token of JustStable— is one way of potentially making money on JustStable.
By looking at its current price, it’s natural to think about the chance of JST hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the JST token by analyzing its tokenomics. JST’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} JST tokens being in circulation today, that means a price of {PRICE} per JST.
How did we come to that calculation? It’s quite easy, the price of a JST token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each JST coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of JST at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for JST to hit that price.
At a price of $1000 per token, that means the current market cap of JST would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. JST’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} JST which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of JST? Taking into account the current price of a JST token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. JST coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a JST token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the JST protocol fully diluted market cap.
These are all crucial details to know when calculating if JST can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of JST depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some JST to your portfolio, the most trusted places to get some are Binance and Coinbase.