Last month, TRON Founder Justin Sun announced the $USDD stablecoin. It was Sun’s, and perhaps TRON’s answer, to the chain’s long-lasting and endemic reliance on the controversial Tether ($USDT) stablecoin.
$USDD was unlike $USDT in many ways, though: namely, it would use the Tron chain’s crypto ($TRX) to maintain its $1.00 peg. Users would be able to swap for $USDD and then stake it for “risk-free yields” of 30%.
Sound familiar? It’s because that entire pitch is a copy/paste of Terra’s and the TerraUSD stablecoin… and we all know how well that went (lol.)
Amid the failure of Terra, Sun said that he “still believe[s] in algorithmic stablecoin” and insisted that “the failure of LUNA was not because algorithmic stablecoins are not viable.” However, given the fundamentally unsustainable nature of TerraUSD’s own 20% yields (and the subsequent collapse of the whole chain), it’s hard to give Sun’s optimism much weight.
Before the collapse of the TerraUSD, it was known publicly that the stable’s 20% yield on Anchor Protocol was unsustainable: less people were borrowing than were lending on the protocol, and its patently high rates were considered by most to be a “customer acquisition strategy.” In the days leading up to its untimely demise, Anchor actually began lowering rates.
Maybe $USDD will be different. But given the volume of high-profile algorithmic stablecoin failures, Sun is more likely to follow the rule, rather than be some exception. Maybe he even knows it, too: the TRON DAO deployed $2 billion to protect $TRX from suffering a Terra-esque collapse.
And even in spite of the recent meltdowns, scores of institutions and retail degens will pile into TRON’s new stablecoin, even as it plagiarizes the core of an idea which ended in tremendous loss to millions of investors. Maybe some people will be able to turn a healthy 30% APY out of $USDD in its first year, or maybe it will all go to zero.
Either way, there are people willing to put up money to give it a go: there is roughly $347 million $USDD in circulation as of this writing. There was more than $10 billion in the TRON DAO’s reserve according to Sun on May 11.