The range of stablecoins or stable cryptocurrencies has recently added a new alternative. Is about Decentralized USD (USDD) or “decentralized USD”, a cryptocurrency of the Tron network that has parity with the US dollar and is based on an algorithm for its issuance.
As CriptoNoticias reported in April, this Tron stablecoin focuses on decentralization, as explained by lead developer Justin Sun when announcing the project. The idea regarding its market value is that it maintains a 1:1 parity with the US dollar, as other stablecoins such as Tether (USDT), USD coin (USDC) or DAI (DAI) do.
The first USDD units were issued on May 5. According to publish on its official Twitter account, its main characteristics are the high speed in transactions, low fees and potential for scalability.
In addition to Tron, the stablecoin is available on the Ethereum and BNB Chain networks. 20 days after its launch, it already accumulates a market capitalization of USD 544 million, according to data from CoinGecko.
On the morning of May 25 (UTC), the cryptocurrency had a brief depeg (that is, it lost parity with its underlying asset, the dollar) and reached its historical low of USD 0.98, although already recovered its original value.
According to whitepaper or white book of the project, next steps include testnet launch and the USDD mainnet, projected for October 10 and November 30, respectively. From December 30, meanwhile, USDD would be available for any user of the Tron mainnet to issue the stablecoin.
For now, however, the stablecoin USDD can now be purchased on decentralized finance (DeFi) protocols and decentralized exchanges (DEX) such as Uniswap, Curve Finance, Kyber Network, PancakeSwap, SunSwap, and Poloniex. You can also trade on centralized exchanges like Huobi, KuCoin, Poloniex, gate.io, Bitget, Bybit, and LBank.
USDD, Tron’s stablecoin that looks a lot like terra USD
The USDD issuance is backed by the network’s native cryptocurrency, Tron (TRX). This is possible through an algorithm that determines that, to create USDD, you have to burn TRX. This also works in reverse; by burning USDD, new TRX units are created. This mechanism allows the stablecoin to have “perpetual existence without relying on any centralized entity,” according to Justin Sun.
The system is identical to the one implemented by the Terra network to issue terra USD (UST), the stablecoin that lost its peg and crashed in early May. In that case, UST’s collateral was terra (LUNA), a cryptocurrency that was used to regulate the supply and demand of the stablecoin.
Another similarity between USDD and UST is the high interest rate offered on some platforms. for those who deposit the stablecoin. For example, on the LBank exchange, this rate currently amounts to 30%, according to a publication from the official USDD Twitter account.
Likewise, in the DeFi Sun.io protocol, typical of the Tron network, the interest rate amounts to 24-28% for those who deposit the USDD/USDT pair to provide liquidity to the platform. These interests are paid in both the USDD stablecoin (21%) and the SUN token (between 2% and 6%), as described in the Farm section of Sun.
Based on the recent experience of LUNA and UST, the comparison is almost inevitable.. Terra’s Anchor protocol once provided a 19% annual return for UST holderssomething that was very attractive to many people, but that he could never achieve in its entirety.
Regarding the reserves that support investors against potential failures of the algorithm, Tron contemplates the creation of the decentralized autonomous organization Tron Reserve DAO (Tron Reserve), which will initially raise $10,000 from investments from “blockchain industry players.” This first stage in the history of USDD, which began on May 5, is largely based on the participation of institutional actors.
This is very similar to the function fulfilled by the Luna Foundation. The organization had reserves that served as a backup in the event of a possible lack of liquidity in the Terra protocol, something that finally happened and that not even all the bitcoins (BTC) in the Foundation’s reserve could remedy.