The meteoric success of Terra's algorithmic stablecoin (UST), which has shot up through the rankings to cement a place among the Top 3 stablecoins, is garnering ever-increasing investor interest. It seemed Justin Sun couldn't sit on the sidelines any longer. Yesterday, he announced the launch of Tron's own USDD coin. The new coin will officially launch on 5 May.
With centralised stablecoins (e.g., USDT from Tether), liquidity is maintained by way of reserves. Thus, under ideal circumstances, each USDT should be backed by $1 held in the company's bank account. In reality, though, direct fiat accounts for less than 5% of Tether's reserves, a fact that was revealed during the course of a court-ordered audit. The company has direct access to coin emissions and could issue USDT-denominated loans to other parties in the form of debt instruments. This threatens public trust in stablecoins as a given coin's fiat peg could be destroyed in the event of a market crisis.
Algorithmic stablecoins take another route: they are tied to other cryptocurrencies. This model has its downsides, but at least developers don't have the ability to mint more coins. Thus, UST's issuance is tied to Terra's internal LUNA coin, and they'll soon be adding a peg to the company's Bitcoin reserves.
Justin Sun has taken this same route, with the developer of Tron's future project resolving to tie USDD to the TRX coin. If USDD falls below $1, arbitrageurs and users can send USDD to the system and receive $1 worth of TRX. If USDD rises above $1, participants send $1 worth of TRX to the system and receive USDD in return.
This development saw TRX shoot up 16% in one day, though it has since lost half these gains in the last few hours.
Tron currently is currently in 22nd place in cryptocurrency rankings, with a market cap of $7 billion and over 88 million network addresses. Due to TRC-20 USDT's low commission volume, it has now overtaken ERC-20 USDT to reach a capitalisation of $41 billion.
The successful launch of USDD will draw attention to this new stablecoin, which will be a positive factor for TRX's future prospects. However, Justin Sun himself is a complex character. He has been accused of plagiarism, user fraud and financial schemes multiple times. For more information, you can see the findings of a series of press exposés published in The Verge. As of yet, no official charges have been brought against him.
StormGain analytical group
(cryptocurrency trading, exchange and storage platform)