Justin Sun has introduced USDD, a new algorithmic stablecoin native to the Tron (TRX) blockchain of which he is the founder. Its arbitrage and store-of-value operation is certainly reminiscent of Terra’s popular UST (LUNA).
A new stablecoin native to the Tron ecosystem (TRX)
Justin Sun, the founder of the Tron blockchain (TRX), announced on Thursday the arrival of an algorithmic stablecoin on the network. The name USDD stands for “Decentralized USD” and will be available on May 5.
The @usddnetwork will provide custody service for the $10B worth of highly liquid assets raised from blockchain industry initiators and use them as an early-stage reserve.
⚖️The @trondaoreserve will set its basic risk-free interest rate to 30% per annum.USDD TRONDAOReserve pic. twitter.com/HrYeGmwWp0
– H.E. Justin Sun (@justinsuntron) April 21, 2022
The way it works is reminiscent of the Terra blockchain UST (LUNA), from which it is heavily inspired and which became the third largest stablecoin by capitalization this week.
Indeed, the USDD will use the same arbitrage system to maintain the 1:1 ratio with the dollar (the peg). So when the price of the Tron stablecoin falls below $1, it will then be possible to send USDD to the protocol to be burned and thus receive an equivalent amount in TRX. And vice versa in the other direction.
In addition, the USDD will also be backed by a store of value that will need to be 10 billion dollars. While Justin Sun did not detail the composition of this pool, he did state that it will be a basket of liquid assets raised from investors.
The Tron DAO will oversee the pool and will offer an initial annual return of 30%.
The asset will be issued via the BitTorrent protocol (BTT), initially on the Ethereum (ETH) and BNB Chain (BNB) blockchains.
What future for USDD?
While the operation on which the USDD is to be based has already proved its worth through the UST, this does not guarantee that it will be adopted and meet with the same success. The news was nevertheless welcomed by Do Kwon, founder of the Terra blockchain:
@trondao is launching an algorithmic stablecoin with mint-and-burn mechanics called $USDD – mint and burn TRX, redeem against TRX
Decentralized economies deserve decentralized money – every blockchain will run on dect. stables soon
@justinsuntron https://t.co/R4xuwtva6O
– Do Kwon (@stablekwon) April 21, 2022
This is not the first time that a native Tron ecosystem stablecoin has been under consideration. Something was tried 3 years ago with TRXD, collateralised in dollars, but it was a failure.
If the Tron blockchain is now being used to some extent, it is partly due to the possibility of transferring USDT at low cost. So it remains to be seen whether USDD is just there to ride the popularity of UST or whether it will appeal to investors by presenting real business cases.
