Justin Sun, creator of the Tron network, announced hours ago that it will launch a stablecoin whose collateral will be the network's native currency, TRX. Although he didn't mention it, the proposed system bears a great resemblance to the Terra network and its LUNA and UST coins.
"Tron DAO joins major blockchain players to launch USDD (decentralized USD)," said Sun. He defines this future currency as "the most decentralized stablecoin in human history, which will make finance accessible to all through the application of mathematics. and algorithms ". According to the entrepreneur, money "will have a perpetual existence without depending on any centralized entity".
Sun details that there will be algorithmic means for USDD to maintain parity with the US dollar, without the need for fiat money as collateral. “When the price of USDD is less than $ 1, users and arbitrageurs can send $ 1 USDD into the system and receive $ 1 in TRX; and when the price of USDD is more than $ 1, users and arbitrageurs can send $ 1 of TRX into the system and receive $ 1 USDD, ”says Sun.
Regardless of market volatility, the USDD protocol will keep the USDD stable at 1: 1 against the US dollar through appropriate algorithms in a decentralized way - Justin Sun, creator of Tron.
Additionally, those who deposit USDD in a given smart contract will be able to receive - according to Sun's explanation - 30% “risk-free” annual interest. To achieve this, the Tron DAO reserve will be established.
4 “space” stages for the Tron stablecoin
The coin will go through several stages until it reaches its final version, as detailed in the USDD whitepaper.
The first stage, called “Space”, starts on May 5th. It will include the first issues of USDD by whitelisted institutions, ie institutions that will be selected by Tron DAO. Furthermore, the creation of the aforementioned Tron DAO reserve is planned and its initial task is mentioned:
The Tron DAO Reserve will raise $ 10 billion in initial reserves from major blockchain players who will make deposits over a period of 6 to 12 months. At the same time, it will continue to attract more liquid assets and bring in more compliant institutions as stakeholders to better fulfill its decentralized role - USDD White Paper.
The second stop is the "ISS" (International Space Station). The start is scheduled for October 10, 2022 with the launch of the USDD test network.
The third stage is "Moon". It is scheduled for November 30 this year and will see the official launch of the USDD network.
Finally, the fourth stage is “Mars” and will be activated on December 30, 2022. At this stage, USDD would be fully operational and available to any user on the core network.
USDD is "a clone of Terra"
Everything that Sun has mentioned as novelty (and which is new for the Tron ecosystem) bears a huge resemblance to the functioning of the UST stablecoin, the Earth network. It is a coin guaranteed by the terra token (quotation LUNA), which has an algorithmic mechanism to maintain parity with the US dollar.
Additionally, Terra's main attraction is the Anchor Protocol platform, which pays 20% annual interest to those who deposit UST in its smart contract. That money, as CryptoNews detailed, is drawn from Anchor's reserves.
The similarities with Terra have not gone unnoticed among cryptocurrency insiders. For example, MakerGrowth founder Mariano di Pietrantonio called USDD a "clone of Terra".
For him, the interesting thing is that the largest liquidity in the main stablecoin, Tether (USDT), is on the Tron network. Di Pietrantonio wonders what effects the introduction of USDD will have on stablecoin exchange fees; on the potential liquidity shift from USDT to USDD; and on the price of TRX.
As for the latter, the news has already had an impact on the price of the cryptocurrency. At the time of this article's publication, each TRX is trading at $ 0,07 per TRX. This represents a 16% increase in the past 24 hours.
Still, TRX is far from its all-time high reached in 2018, when the coin traded for $ 0,3 (at four times its current price).