Justin Sun recently announced that his blockchain, Tron, will be launching its own algorithmic stablecoin, USDD. Algorithmic stablecoins have been all the buzz lately with drama around Terra’s Do Kwon declaring war on Maker DAO's DAI stablecoin. Terra (LUNA) has been a much loved crypto recently due to its massive appreciation from ~$5 to ~$100 in the past year, largely thanks to its stablecoin yielding project Anchor.
Anchor famously touted a 20% annual yield (APY) on UST stablecoin deposits. The UST stablecoin holds its price by burning LUNA when more UST is minted, dropping the supply of LUNA and increasing LUNA’s price. When UST is converted to LUNA, LUNA is minted and UST is burned. In this system, if you can keep the demand for UST high by offering a large yield, you can drive the price of LUNA up. Anchor accounts for 78% of the Terra ecosystem’s total value locked.
Justin Sun, the founder of Tron (TRX), has clearly been paying attention to LUNA’s market mechanics. He’s launching a Tron stablecoin, USDD, alongside a protocol that will issue 30% APY on USDD deposits. Tron’s version of Anchor will be Tron DAO, which will manage the deposits for the USDD stablecoin. Sun described the stablecoin mechanics:
“When USDD's price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX. When USDD's price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD.”
Just like how Do Kwon has announced they are buying billions in other crypto assets (AVAX, BTC, etc.) to back the stablecoin, Justin Sun has announced that the stablecoin will be launching with $10B in “highly liquid assets raised from initiators of the blockchain industry.” The stance of both Terra’s UST and Tron’s USDD being backed by other cryptocurrencies is in contrast to Maker DAO’s DAI, which has been increasing their reserves of real world assets like loans to Tesla.
Sun has said that at the time of launch, USDD will be available on Ethereum and BNB Smart Chain. This news comes just weeks after another competing project, NEAR protocol, announced their USN algorithmic stablecoin and its 20% staking APY protocol.