Justin Sun is following the steps of Terraform Labs in creating a stablecoin that will be backed by cryptocurrencies. Sun plans to release a decentralized algorithmic stablecoin dubbed USDD for the Tron network.
Sun released an open letter in April 2011 saying that the USDD stablecoin will not be backed by any centralized asset; rather, it will be fully decentralized.
Justin Sun set to release Tron stablecoin
The Tron founder said that the USDD stablecoin would not depend on any centralized institution for any functionality such as storage, redemption or management. Instead, the stablecoin will be issued in a decentralized manner, and its value will be pegged in TRX, the native token for the Tron blockchain.
“TRON DAO joined hands with major blockchain players to launch USDD (Decentralized USD), the most decentralized stablecoin in human history, making finance accessible to all by applying mathematics and algorithms. As a result, it enjoys perpetual existence without relying on any centralized entities,” the open letter read.
Sun also outlined how the stablecoin’s value will be sustained. If the value of USDD falls below $1, users can send 1 USDD to the network and receive $1 worth of TRX in return. If the price of USDD goes above $1, users can send $1 worth of TRX to the network and receive $1 USDD.
Sun further said that the algorithm of this stablecoin would retain its stability against the USD despite volatility in the market. The TRON DAO reserve will also come with a risk-free interest rate equivalent to 30% annually, and it will offer custody services for $10B worth of highly-liquid assets. The fund will be used as a reserve to boost the stability of the USDD stablecoin.
The USDD stablecoin will be issued and circulated on May 5 2022. The stablecoin will be available on the Ethereum blockchain and BNB Chain through the BTTC cross-chain protocol.
Sun’s plan is similar to Terra’s
Sun’s plan to have a stablecoin backed by cryptocurrencies is similar to Terraform Labs. Terraform Labs plans to buy $10 billion worth of Bitcoin to back the UST stablecoin.
Kwon said that the BTC reserves would be used to backstop UST’s short term redemptions and create a decentralized forex reserve. Do Kwon has said that its buying spree will make Terra one of the largest Bitcoin holders.
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Source: https://insidebitcoins.com/news/justin-sun-is-set-to-release-tron-stablecoin-backed-by-cryptocurrencies