Tron Founder Justin Sun has announced the launch of a decentralized algorithmic stablecoin, USDD. Sun announced the news on Twitter and in an open letter to the community, stating that the new decentralized stablecoin could help decentralize the blockchain world’s most centralized territory.
According to the announcement, the new decentralized stablecoin will be available on Tron from the 5th of May.
Details Of The Stablecoin
The new USDD stablecoin will operate differently from traditional stablecoins such as the USD Coin (USDC) and Tether (USDT), which are backed by fiat (USD) and other assets maintained in an account. The new USDD stablecoin will be an algorithmic stablecoin, similar to TerraUSD (UST) and Frax Finance (FRAX). Initially, the USDD will be issued as a TRC token on Tron’s network.
The USDD stablecoin will utilize a similar system to the algorithmic stablecoins and maintain its peg to the USD. Explaining the mechanics behind the USDD stablecoin, Sun stated,
“When USDD’s price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX. When USDD’s price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD.”
Sun has claimed that USDD’s algorithm will allow the stablecoin to maintain its peg against the Dollar irrespective of prevailing market conditions.
A $10 Billion Backing
The Tron DAO, a decentralized autonomous organization (DAO), will handle the USDD stablecoin, administering a reserve with an interest rate of 30%. The DAO will also provide custody reserves of up to $10 billion. These assets will be highly liquid and serve as collateral backing for the USDD stablecoin.
This approach is similar to the one taken by the Founder and CEO of Terraform Labs, Do Kwon, who has announced plans to acquire $10 billion of Bitcoin, which would act as reserves for UST.
However, Sun has not clarified which assets would be serving as collateral for the USDD, only stating that the assets would be highly liquid and raised from initiators of the blockchain industry.
Justin Sun’s Tron stablecoin initiative was met favorably by Do Kwon, who stated “decentralized economies deserve decentralized money” and went on to say that soon, every blockchain would run on decentralized stable currencies. According to Sun, the USDD stablecoin will be available on BNB Chain and Ethereum, launched through BitTorrent Network’s cross-chain protocol.
The Need For A Native Stable Currency
Sun explained why it was important to have a native stable currency on Tron, stating that the gradual expansion of the USDT transaction volume heralded the need for USDD. USDT has gained significant popularity on the network thanks to traders looking for arbitrage opportunities without having to pay much in terms of transaction fees.
The Tron Ecosystem
Tron has seen significant growth over the years, with over 87 million on-chain users and around 3 billion transactions in its ecosystem. Tron’s circulating supply of TRC-20 USDT has now exceeded that of ERC-20 USDT, making Tron the largest stablecoin network in the world. Tron holds over $55 billion in financial assets, which include on-chain stablecoins, and has also settled and cleared financial transactions worth $4 trillion.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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