“The TRON DAO Reserve will provide custody service for the $10 billion worth of highly liquid assets raised from initiators of the blockchain industry, use them as an early-stage reserve, keep the exchange rate of USDD stable, and enforce convertibility fully,” the TRON founder Justin Sun wrote in an official announcement.
Algorithmic stablecoins recently became a hot topic in crypto following the success of Terra’s UST. Unlike the traditional stablecoins USDC, BUSD, and USDT, which are backed by 1:1 collateral, algorithmic stablecoins rely on the supply & demand engineering mechanism. The basic idea is to expand the supply when the price is over $1 to lower it and to decrease the supply when it’s below $1 to create a deficit.
“USDD will be pegged to the underlying asset, TRX, and issued in a decentralized manner. 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,” Justin Sun explains. Besides the TRON blockchain, USDD is already available on Ethereum and Binance Smart Chain.
However, the USDD launch drew a solid portion of criticism from the crypto community. Some Twitter users pointed out the striking similarities between Tron’s stablecoin and Terra’s UST.
Terra co-founder Do Kwon congratulated Justin Sun and implied that Terra, the pioneer of algorithmic stablecoins, will only benefit from the emerging trend.