USDD launched on May 5th, following the initial blueprint of an algorithmic stablecoin that had limited reserves. TRON claims that it has now overcollateralized stablecoins with a reserve of over 14,000 bitcoin.
TRON announced this morning that it will significantly increase its capital to back up Terra’s algorithmic stabilitycoin after the May collapse.
USDD — initially a nearly carbon copy of Terra’s stablecoin UST, arrived on TRON’s blockchain in May 5. Justin Sun, founder of TRON, said that USDD was initially designed to keep its US dollar peg algorithmically. However, with some backing, USDD is now being overcollateralized.
He stated that a reserve of stablecoins and cryptocurrencies has been built and will be maintained at least 130% of total USDD issuance. TRON stated that the collateral ratio was “guaranteed” and that it would start publishing real-time updates about the collateral ratio on TRON DAO Reserve’s website starting June 5.
According to TRON spokespersons, the reserve currently contains 10,500 bitcoin, 240 million USDT and 1.9 billion TRX. There is also 8.29 billion TRX in a burned contract.
Sun stated that they want to make USDD a hybrid model. “So, on one side we have an algorithmic stabilitycoin — an algorithm that makes the stablecoin stabilize — and on the other we have TRON DAO reserve.”
Algorithms for ailing
USDD was created to encourage arbitrageurs to keep USDD’s price at the US dollar by trading between TRON’s token TRX and USDD, following the algorithmic stability blueprint. TRON, like Terra, had indicated its intention to create a reserve of billions in bitcoin and other cryptocurrency to support USDD during extreme market conditions.
Despite this, Terra’s UST was not able to rely on the combination of security measures. The stablecoin, the third-largest by issuance before its collapse, swung sharply away form its dollar peg in May, taking down Terra’s LUNA and wiping off around $40 billion in value within a matter days. In a desperate attempt to restore the peg’s value, billions of dollars worth of bitcoin were traded and untold numbers of Terra’s native token LUNA were issued.
Sun believes that USDD still has hope — it has reached $667million in total circulating supply — provided it is properly supported.
“The reserve backing that we use right now is highly diversified. It includes Bitcoin and all types of stablecoin. He said that USDC [Circle’s stablecoin] will make up a portion of our reserve but only a small amount.
TRON released a complete list of assets in its reserve. These include bitcoin, TRX and USDC.
Sun said that all Bitcoin addresses would be signed by signatures so everyone will know which bitcoins belong.
Don’t give up
Sun stated that the industry needs to create stablecoins so-called “decentralized”, which cannot be hampered by regulators in an interview.
Sun answered that he felt tempted to abandon USDD after the collapse of UST. He said that the Luna Foundation Guard, a Singapore-based non profit that had raised billions in cryptocurrency to support UST, mismanaged the situation by trying sell to panicked investors.
He stated, “We must be one step ahead of the market.” “We want to participate in a role that stabilizes the market — to reduce volatility in the first instance.”
TRON currently funds the majority of the reserve, but Sun says that the company plans to raise capital from other investors.
Holders of UST could, prior to its demise in 2016, park their stablecoin in Terra’s lending platform Anchor Protocol to receive interest rates of 20%. Many had previously flagged this as unsustainable. TRON also has JustLend, a similar platform. It currently offers an annual interest rate of 17.67%. Sun stated that he plans to increase it to “around 30%”.
