Terra fiasco triggers bigger backstop for TRON’s stablecoin

TRON said that they are now too focused on the stablecoin USDD algorithm too much even though it was only released a month ago.

After the UST – Terra’s stablecoin algorithm – collapsed in early May, TRON announced that it would increase its capital to support USDD.

The USDD was launched on TRON’s blockchain on May 5 and can be seen as a copy similar to the UST. The USDD’s operating mechanism is designed to maintain its exchange rate against the US dollar algorithmically. Although there is some support, the USDD will now be decentralized excessively, according to TRON founder Justin Sun.

He said that a reserve consisting of cryptocurrencies and other stable currencies has been accumulated and will be maintained at a minimum of 130% of the total amount of stable coins issued. According to a TRON spokesperson, the reserve contains 14,040 bitcoins (around $418 million), 140 million USDT, and 1.9 billion TRX, as well as 8.29 billion TRX in a burning contract.

Justin Sun said that TRON wants to upgrade USDD to the hybrid model. So, in addition to the stablecoin algorithm, they also have the TRON DAO Reserve.

Algorithmic stablecoins

The USDD is designed to be quite similar to the UST. TRON has also signaled its intention to establish a multi-billion-dollar stock of Bitcoin and other cryptocurrencies to support the USDD under extreme market conditions.

However, the combination of protections proved spectacularly ineffective on Terra’s UST. stablecoin, the third-largest coin issued before the collapse, broke hard from the dollar anchor in mid-May, knocking down Terra’s LUNA and wiping out about 40 billion dollars worth in a matter of days.

However, Justin Sun still believes USDD can outperform UST with a market capitalization of more than $600M. TRON has provided a complete list of assets in the repository, namely Bitcoin, TRX, USDC, USDT, TUSD, and USDJ.

Not giving in

Justin Sun said that building “decentralized” Stablecoin that regulators can’t interfere with is urgently necessary for the cryptocurrency industry.

Asked whether he was tempted to abandon the USDD project after UST’s collapse, Sun said the Luna Foundation Guard mismanaged the situation by trying to sell to panicked investors.

Before Terra collapsed, UST holders were able to place stablecoins in Terra’s Anchor Protocol lending platform to earn 20% interest, which many had flagged as unsustainable. TRON has a similar platform called JustLend. Currently, it offers an annual interest rate of 17.67%, but Sun says he hopes to push that figure higher – to “about 30%”.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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