Tron, a cryptocurrency created by controversial Chinese crypto entrepreneur Justin Sun, is reportedly planning to launch an algorithmic stablecoin called $USDD. The coin might compete with the likes of Terra USD ($UST), Dai ($DAI), and other algo stables.
Algorithmic stablecoins are a type of stablecoins that aren’t backed by fiat currency or another crypto. Instead, algo stablecoins set their monetary policy using code – which keeps the price pegged to the value of an asset. As the name implies, an algorithm underlying these stablecoins increases supply if a deflationary trend is noticed in the token and decreases supply if purchasing power declines — and that’s how the price of an algorithmic stablecoin is determined.
The Tron team might be trying to draft off the meteoric growth of TerraUSD, a stablecoin issued by Terra, which has amassed a multi-billion dollar market cap because of its unprecedented rewards.
$USDD will look to steal some of Terra USD’s thunder by offering users a basic “risk-free” interest rate of 30% APY. The high rate takes after Terra USD’s double-digit interest rate on platforms such as Anchor Protocol and other cross-chain DEXes.
$USDD will be launched on May 5, 2022. The new stablecoin will be backed by Tron’s native token, $TRX.X — which soared by 10% after the announcement, hovering around $0.06.
In a separate announcement, Tron DAO said it intended to raise $10 billion from blockchain industry players over the next six to 12 months. The idea is to ensure that stablecoins issued on Tron, such as $USDD, have liquidity in times of crisis. This move shares some striking similarities with Terra’s Luna Foundation Guard (LFG) purchasing Bitcoins in order to provide more cushion to its stablecoin TerraUSD.
Justin Sun wrote an open letter to the Tron DAO (decentralized autonomous organization) explaining that the new stablecoin would represent a departure from the chain’s heavy dependence on Tether ($USDT), which is the world’s largest stablecoin. However, unlike USDD, Tether’s centralized nature has made it a topic of concern among crypto maxis – namely because of the lack of transparency surrounding its reserves.
Sun said that $USDD will usher in the “stablecoin 3.0 era.”