Sale time for algorithmic stablecoins. Tron’s USDD, which had been criticized for being a bit too similar to Terra’s defunct UST, seems to be following a similar path. It has yet to re-establish parity with the dollar, despite the fact that the teams were trying to avoid a “depeg” last week.
The limitations of the Tron USDD
Last week, we told you that Tron’s algorithmic USDD stablecoin was in danger of suffering the same fate as Terra’s UST. As a reminder, both of these “stable” cryptocurrencies were originally intended to maintain a $1 price through a “burn” mechanism. For USDD, this is based on TRX, the native currency of the Tron network.
If this system seems familiar, it’s not for nothing, it was inspired by, if not simply copied from, Terra, and so it can potentially suffer the same pitfalls. To avoid this, the project teams announced last week that they were adding 700 million USDC to the USDD reserve to prevent loss of anchorage.
But already, loopholes had been noted. The USDTs used alongside the USDC to back the stablecoin were deposited on JustLend to generate yield. In addition, falling prices directly impact the reserve, which mechanically loses value. This has fuelled suspicions, which for the moment seem to be justified.
Tron’s USDD still below a dollar
Indeed, a week later, the USDD has still not returned to parity with the dollar, far from it. Based on data aggregated by CoinGecko, Tron’s algorithmic stablecoin is now hovering around $0.96, after dropping as low as $0.93 two days ago:
USDD fails to get closer to $1
If you go to the Tron DAO Twitter account, you’ll notice that the pinned tweet has been the same since June 17. To the question “Is the USDD depegged?” he replies:
” No. The USDD is a decentralised stablecoin that relies on an on-chain mechanism and collateralised assets, unlike centralised stablecoins like the USDC. “
No other explanation for this “depeg” will be found. Yesterday, a terse message from Justin Sun informed the community that the Tron DAO Reserve had purchased USDD 10 million in order to “protect the blockchain industry as a whole and the cryptocurrency market.”
Still, for now, the USDD is still worth less than a dollar. If he succeeds in restoring parity, he will then have to tackle a huge new task: regaining the confidence of investors who were particularly burned by the Terra affair.
