The success of the algorithmic stablecoin UST of the Terra project, which has soared into the TOP 3 stable coins, attracts more and more attention. So Justin Sun could not stay away, announcing the release of USDD yesterday. The launch of the coin will take place on May 05.
In centralized stablecoins (for example, USDT from Tether), liquidity is supported by reserves. So, ideally, each USDT should be secured with $1 in the company’s bank account. In fact, in the reserves of Tether, fiat directly accumulates less than 5%, which was disclosed during the forced audit. The company has direct access to the issue of coins and can issue a loan in USDT against the debt obligations of other persons. This will undermine the credibility of the stablecoins, since in the event of a crisis in the market, the binding of the stablecoin to fiat will be broken.
Algorithmic stablecoins go a different way – they are connected with other cryptocurrencies.
This model has its drawbacks, but the developers are unable to print more coins. So, the issue of UST is associated with the internal LUNA coin, and soon a binding will be added to the Bitcoin purchased under the reserve.
Justin Sun went the same way. As a developer of the Tron project, he binds USDD to the TRX coin. If USDD falls below $1, arbitrageurs and users can send USDD to the system and receive TRX in the amount of $1. If USDD becomes more expensive than $1, participants send $1 worth of TRX to the system and receive USDD.
On this news, TRX soared by 16% in a day, but in recent hours it has lost half of the increase.
Image Source: StormGain Cryptocurrency Exchange Image Source: StormGain Cryptocurrency Exchange
Tron occupies the 22nd line of the rating with $ 7 billion capitalization, and the number of network addresses exceeds 88 million. Due to low fees, the turnover of TRC-20 USDT exceeded ERC-20 USDT, reaching $41 billion.
The successful launch of USDD will attract attention to the new stablecoin, which will have a positive impact on the prospects of TRX. However, Justin San himself is an ambiguous figure. He was often accused of plagiarism, user fraud and financial fraud. You can read about the results of the journalistic investigation in The Verge articles. Official charges were never brought.