Quick Take
- Tron’s new algorithmic stablecoin follows on from the success of Terra’s UST, which has topped $18 billion total issuance.
- The Near Protocol has also rolled out its own stablecoin in recent weeks.
The stablecoin — similar in almost every way to Terra’s UST — is designed to incentivize arbitrageurs to keep its price closely pegged to that of the US dollar, through trading between TRX, Tron’s token, and USDD. Like Terra, Tron has also signalled its intent to establish a reserve of $10 billion in bitcoin and other cryptocurrencies to support the new stablecoin.
Tron unveiled its plan to roll out USDD on April 21. According to the announcement, the stablecoin will be available on Ethereum and BNB Chain via the BitTorrent network’s cross-chain protocol.
In an interview, Tron founder Justin Sun told The Block that he sees USDD as becoming “just like bitcoin” — except that its price, in theory, will be aligned with that of the US dollar. Both he and Terra founder Do Kwon have spoken of their desire to build stablecoins that are resistant to interference by regulators.
“We need to make the stablecoin in the industry just as decentralized as bitcoin, so no one can touch it,” Sun said. “I believe in the next five to 10 years, crypto will be settled by decentralized stablecoins.”
Asked how these stablecoins would combat criminality, Sun pointed to data tools like Chainalysis. He does not believe, he added, that freezing assets is an effective remedy to money laundering.
If all else fails
A decentralized autonomous organization (DAO) named Tron DAO will manage USDD. Tron DAO will administer a reserve with a 30% interest rate, according to the April 21 announcement.
It will also oversee an effort to amass $10 billion in bitcoin and other decentralized cryptocurrencies for the proposed reserve. Sun likened the DAO to the Luna Foundation Guard, a Terra-boosting non-profit based in Singapore that raised $1 billion for a reserve through a sale of LUNA in February. The idea is that these reserves will step in to help preserve their respective stablecoins’ pegs, should a sudden crypto market slump cause the algorithmic method to fail.
“The number one priority is just to try to stabilize USDD,” said Sun. “We want to keep USDD stable and win people’s trust.”
Sun said Tron would collaborate with institutional investors — mainly crypto exchanges and venture capitalists — to get USDD’s reserve off the ground, although he did not name them. Tron DAO will also contribute TRX, bitcoin, ether and some established stablecoins to the reserve, he added.
“We already have the liquidity for the first round. I think right now, for the next six to twelve months, we already have enough [in the] reserve to kick everything off. But, of course, we will reserve the option to get more financing in the future,” said Sun. “Kicking off in May, I think we’re probably going to have $1 billion put into the reserve.” The Block has not been able to verify whether that $1 billion has indeed materialised.
Terra’s UST is the pioneer among what is now a group of ‘protocol-native’ stablecoins, with total issuance of UST now at above $18 billion, according to The Block Research. That compares to around $83 billion in Tether’s USDT, and $44 billion in Circle’s USDC.
Shortly after Tron’s announcement in April, Near Protocol announced the launch of a decentralized stablecoin named USN, confirming earlier reporting by The Block.
