The goal of the stablecoin projects is to create a more centralized digital currency than those that exist today. They want to replace the trust that comes along with using a single cryptocurrency with a trustless digital token that can be used anywhere that accepts that specific cryptocurrency. In other words, they were trying to create a digital currency that was trustless and trustable. As we have seen with many other stablecoin projects, if they are not pegged to a stable asset, they are not stable. So how is TRON’s USDD different from MakerDao’s Dai and can it overthrow the top stablecoins?
TRON’s founder Justin Sun announced in a blog post that TRON DAO would take out $10B in collateral to launch an algorithmic stablecoin, offering 30% annual percentage returns to investors. He calls it USDD and says it will be “the most decentralized stablecoin in history.” It will launch on May 5.
Justing Sun’s TRON Track Record in the Stablecoin Space
Although outlandish, Sun has not shied away from making bold claims. He is the same founder who spent $4.5M on a lunch with Warren Buffett and $28.5M on a trip to space with Blue Origin.
The move was criticized widely on crypto Twitter.
VC specializing in crypto, Branson Bollinger, told The Defiant, “I wouldn’t touch it.”. There are so many smart people in this space so going near a project with a questionable leader would be pointless.
In spite of this, TRON has a strong track record in the stablecoin space. As a dollar-pegged stablecoin issued by Tether, TRON has processed more than $4T of USDT transactions since its launch in 2017. The TRON network hosts more than $55B in financial assets, making it the world’s largest stablecoin network. TRON had no immediate comment.
TRON’s move comes amid a worldwide surge in stablecoins, a class of cryptocurrency that attempts to stabilize prices by being backed by a reserve currency such as USD. According to DeFiLlama, MakerDAO’s DAI’s total value is over $14 billion, and Terra’s UST is nearly $30 billion.
Do Kwon, the CEO of Terra, the surging stablecoin project that pledged $10B of Bitcoin collateral for its own stablecoin earlier this year, has also recently taken market-moving measures. As soon as Sun announced his announcement, the self-styled “Master of Stablecoin” weighed in.
Algorithmic Stablecoin
Every blockchain will run on dect – decentralized economies deserve decentralized money. Eventually, Kwon tweeted. As he continued in a separate tweet, however, “currencies are ultimately backed by the economies that use them, and decentralized and self-sovereign stablecoins are clearly the way of the future. Justin Sun and Do Kwon have both caused heavy controversy with their projects when compared to ponzi schemes.
In Sun’s words, USDD will be fully decentralized and “will not be held by any institutions for redemption, storage, or management.” USDD will be pegged to TRON’s TRX cryptocurrency and is managed by an algorithm that is designed to keep USDD stable at 1:1.
Terra’s UST Stablecoin
USDD will be managed by the TRON DAO Reserve and several major blockchain institutions, which have not been revealed. The mechanism Sun describes is similar to Terra’s UST stablecoin, which recently overtook Binance USD to become the third-largest stablecoin on the market.
A TRON DAO Reserve will provide custody service for the pledged $10B of collateral, use it as an early-stage reserve, keep the USDD exchange rate stable, and enforce convertibility fully.
TRON’s DAO Reserve will set its interest rate to 30% APY and make sure organizations that accept USDD use the same interest rate policy.
Bollinger is not the only skeptic when it comes to APY. According to @Route2FI of Alongside, a prominent crypto voice with 226k followers, “I think 30% APY is way too high. I mean, Anchor Protocol is struggling with 20% APY. How will Justin Sun sustain 30%?”
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Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
