Home » Tron (TRX) becomes the 3ᵉ blockchain of the DeFi thanks to its algorithmic stablecoin

Tron (TRX) becomes the 3ᵉ blockchain of the DeFi thanks to its algorithmic stablecoin

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Thanks to the returns offered by its algorithmic stablecoin, the Tron (TRX) blockchain comes in at 3ᵉ place, according to total locked value (TVL) in decentralised finance (DeFi). However, there are several elements that remind us of the craze around Terra (LUNA), before its collapse.

Tron ecosystem joins the DeFi podium

According to data from DefiLlama, Tron (TRX) is now the 3ᵉ blockchain of decentralised finance (DeFi) in terms of total locked-in value (TVL). This TVL is currently around $6 billion and has grown by 50% in the space of a month.

USDD, the new algorithmic stablecoin in the ecosystem, is no stranger to growth. Indeed, it is possible to generate more than 20% returns with it, by collateralizing it on the JustLend protocol.

JustLend is the main application of this ecosystem and allows loans to be made and borrowed in the manner of Aave (AAVE). In fact, the protocol alone capitalises 50% of Tron’s TVL in the DeFi.

Like a sense of déjà vu

An algorithmic stablecoin and 20% returns obviously remind us of the now defunct UST on the Terra blockchain (LUNA) with the Anchor protocol. By the way, these returns are mainly generated by liquidity mining, i.e. financial incentives to get us to deposit our liquidity:

Returns offered on JustLend

Returns offered on JustLend


As the illustration above shows, while the USDD provision is only supposed to offer 3.31% annual returns, the additional incentives increase these to 23.54%. We can therefore legitimately ask what will happen when these incentives tend to decrease, as was the case on Anchor some time before the collapse of Terra.

Moreover, there is no guarantee that the USDD would be more robust than the UST in the event of a loss of anchorage, given that its operation also involves a very similar arbitrage system. An arbitrage that failed to play its role in the face of speculation when the UST fell.

Nevertheless, it is interesting to note that investors seem to be taking a cautious approach for the moment. Indeed, of the $3.2 billion deposited on JustLend, the amounts borrowed represent only 10% of this sum, which implies a measured risk-taking.

An ecosystem that is limited in its offerings

While it is possible to compare the risks of USDD to UST, it is important to put them into perspective. The Tron blockchain is certainly 3ᵉ, but its TVL is 5 times lower than what Terra experienced on its April highs. Ethereum (ETH), on the other hand, remains far ahead with $72 billion.

According to DefiLlama, the ecosystem founded by Justin Sun has only 8 different applications and its current performance does not bode well for its long-term survival, especially given the current market situation.

It is also worth remembering that the USDD, which has given this blockchain renewed interest, was created by surfing on the popularity of the UST at its peak. Let us hope then that it does not suffer the same fate. For although the systemic consequences would probably not be as pronounced, authorities around the world would be sure to take another example in their regulatory discourse.

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