The Tron Reserve continues its plan to strengthen the stablecoin (stable cryptocurrency) Decentralized USD (USDD) by buying bitcoin (quotation BTC). To this end, it bought the equivalent of $ 50 million in BTC and Tron (TRX) to support the issuance of the recently launched cryptocurrency, which maintains parity with the US dollar.
The purchase was communicated in a tweet
The purchase was communicated by the decentralized autonomous organization (DAO) Tron Reserve in a tweet. This would bring reserves to more than $ 700 million, although the organization's website still reports a figure of $ 669 million.
It just so happens that the amount still includes the 14.040 BTC reported by CryptoNews a week ago. Adding the $ 50 million worth of bitcoins purchased yesterday, the amount would rise to 15.836 BTC.
The amount of reserves in the stablecoin Tether (USDT) has changed since the last publication, from 240 to 140 million dollars.
Tron's goal is to keep the collateralisation in USDD at a rate above 130% to ensure that the stablecoin always has the support it needs, as described in the project's white paper. This strategy is called "overcollateralisation".
To this end, they use an algorithmic method and create a reserve to be used in an emergency. This reserve is made up of bitcoin and other cryptoassets which allow the USDD to maintain parity even in the event of unforeseen unfavorable circumstances.
In addition to the parity preservation algorithm, which emulates the price of various assets so that the stablecoin maintains the expected equivalence, there is also the burning of TRX, the other cryptocurrency in the network. To issue USDD, an equivalent amount in TRX must be taken out of circulation.
At the time of writing, the collateralisation of the stablecoin stands at 192%, taking into account the two factors mentioned above. The current USDD bid is 723.321.764 units. The first phase of the project, which will last until October 2022, foresees a maximum issuance of 2 billion dollars.
Tron buys BTC, as Fundación Luna did with Terra
Terra, the developer of the network of the same name and the failed USD stablecoin (UST) terra, was also buying bitcoin to support its main project. This newspaper regularly reported on recurring cryptocurrency purchases by the Luna Foundation.
However, the debacle of UST and Terra's other cryptocurrency, LUNA, could not be avoided even by selling the organization's million-dollar reserves.
As explained in previous publications, the Tron model is strikingly similar to that used by Terra. First, it is also an algorithmic stablecoin. This means that it is not directly supported by other assets for its issuance, but is governed by algorithms that emulate the price of those assets.
Additionally, USDDs are issued by burning TRX. The same goes for UST, issued by LUNA in flames. Thirdly, the aforementioned reserves, managed by the Luna Foundation and the Tron Reserve, which include both bitcoin and other cryptoassets to avoid the depeg (loss of parity) of the stablecoin in times of excessive selling pressure.
The leaders of each project also have a similar profile. Justin Sun, the main developer of Tron, was criticized for some "ironic" comments about the other cryptocurrencies on his Twitter account.
Do Kwon, the leader of the Earth project, had the same profile and more than once mocked other projects and cryptocurrencies on social media. In an interview he went so far as to say that "95% of cryptocurrencies will die" and admitted that it is something "fun to watch". Eventually, this happened with its own stablecoin.
