Today, Justin Sun, the Founder of Tron announced a new algorithmic stablecoin called USDD. This is similar to Luna’s popular UST stablecoin which offers a high APR to users. USDD will apparently offer 30% APR for its users.
The USDD stablecoin will have an insurance fund of up to $10 billion USD of “highly liquid assets,” similar to UST built on Luna. UST also offers a similarly high and low risk interest rate, which has attracted a lot of new money into the stablecoin.
The rates offered by these stablecoins exceeds even the average interest rate on junk bonds in the US, leading to many to speculate that a large amount of bond traders are going to move to crypto to find higher APR. Many bonds are currently not even beating inflation which is roaring at over 8% year over year in the US.
It remains unclear if USDD will be backed by only BTC like UST is, or if it will be backed by some other highly liquid cryptocurrencies like Tron. Justin Sun said that USDD will provide custody for $10 billion of “highly liquid assets” which likely means various cryptocurrencies which have the highest volume and most liquid orderbooks.
Founder of Luna, Do Kwon, commented on Tron’s move to launch the USDD stablecoin saying eventually every blockchain will run on decentralized stablecoins. Justin offered to collaborate with UST and LUNA, to which Do Kwon responded with a hand shake emoji.
In a statement released by Justin Sun, Tron is said to be “pooling all it’s resources to create USDD.”
Tron is currently the largest stablecoin network, hosting over $55 billion of stablecoins, most of which is USDT the most popular and oldest stablecoin in circulation.
To keep USDD stable with the Dollar, when the price of USDD falls below a certain threshold, users will be able to send 1 USDD to the system and receive $1 worth of TRX in return. When the price of USDD rises above a certain threshold relative to the dollar, users will be able to redeem $1 of TRX for 1 USDD.
This system will allow the price of USDD to remain within a narrow range against the Dollar, similar to how UST currently functions on LUNA.
USDD is scheduled to enter circulation on May 5th, 2022. It will be available on Tron, as well as Ethereum and Binance Smart Chain thanks to cross-chain technology built on BTTC.
The statement says that there are 4 stages to the roadmap, “1.0 Space, 2.0 ISS, 3.0 Moon, 4.0 Mars.” While only revealing what the first stage is, which is the plan for the TronDAO to custody the initial $10 billion reserve of “highly liquid assets” that will help back the decentralized stablecoin.
TRX is up over 15% on the news, and some are speculating that this could lead to TRX having a massive bull run like LUNA, which was one of the best performing cryptocurrencies last year.