On Thursday, Justin Sun, the founder of Tron, announced that it would have its own native stablecoin dubbed USDD.
However, the stablecoin won’t function as the traditional stablecoins such as Circle’s USD Coin (USDC) and Tether (USDT) that have other assets, including dollars in bank accounts as backing. The soon-to-be-launched stablecoin will be an algorithmic stablecoin such as Frax Finance (FRAX) and TerraUSD (UST).
For keeping its peg to the U.S. dollar, USDD will have a system similar to these algorithmic stablecoins. Users and arbitrageurs can receive 1 USD worth of TRX and send 1 USDD to the system. If the price of USDD is higher than 1 dollar, then arbitrageurs and users can receive 1 USDD and send 1 USD worth of TRX to the decentralized systems, explained Sun.
The Tron founder also claimed that the algorithm of USDD would ensure that the U.S. dollar peg of the stablecoin is maintained regardless of the market conditions.
USDD Will Be Available On BNB and Ethereum
The blockchain’s stablecoin will be managed by a decentralized autonomous organization (DAO) called Tron DAO. Tron DAO will be supervising a reserve with a 30% interest rate, claims Sun.
In order to serve as collateral backing for USD, Tron DAO will offer custody reserves of up to $10 billion in highly liquid assets. This plan has various similarities to the plan of Do Kwon, the founder, and CEO of TerraLabs, to obtain $10 billion of bitcoin to serve as reserves for UST.
However, the Tron founder did not reveal details regarding what would serve as collateral, saying that it’s going to be “highly liquid assets raised from initiators of the blockchain industry.” For keeping the stablecoin pegged to the U.S. dollar, the asset will be used as a reserve.
Meanwhile, Kwon gave a favorable response to the announcement of stablecoin by Tron, saying, “decentralized economies deserve decentralized money.” Further, he says that every blockchain will be going to run on these decentralized stable currencies.
As per the announcement of Tron founder, USDD will be available on BNB and Ethereum when launched through the cross-chain protocol of the BitTorrent network.
ALSO READ: Why did the US Sanctions list add Russian Crypto Miner Host Bitriver?
Source: https://www.thecoinrepublic.com/2022/04/23/trons-justin-sun-to-roll-out-algorithmic-stablecoin-usdd/