On May 5, Tron’s USDD algorithmic stablecoin was launched, and so far, the fiat token has been listed on various decentralized finance (defi) protocols. Two days later, Tron DAO Reserve announced that it has purchased 504.6 million tron (TRX) to support the algorithmic stablecoin as the project aims to leverage a decentralized currency reserve similar to Earth’s UST reserves.
Tron DAO Reserve and Justin Sun reveal $38 million TRX purchase
Terra’s UST reserve system is becoming a popular scheme, and Tron’s USDD stablecoin project is following suit. Bitcoin.com News reported on the algorithmic stablecoin project Tron on April 21, and the fiat crypto asset has been officially launched since then. The project has several partners now and USDD is listed on Pancakeswap, Kyberswap, Sunswap, Sun.io, Curve Finance, Uniswap and Ellipsis.
According to tronscan.org, there is approximately $211,245,005.49 at the time of writing. Statistics show that as of Saturday, May 7, 2022, Uniswap version three (v3) is the most active exchange for buying and selling USDD. While the $211 million market cap is a small thing for Earth’s UST ($18.7 billion), it has only been around for two days. While terrausd (UST) recorded US$990.3 million in 24-hour transactions, USDD recorded US$2.31 million in the last day. The USDD market valuation is higher than Gemini’s (GUSD) market capitalization of $199.5 million.
On Saturday, Tron DAO and Tron founder Justin Sun announced that the team had purchased 504,600,250 TRX at an average price of 0.07727 per unit. The purchase will be used as a reserve asset to “safeguard the blockchain industry and cryptocurrency market,” reserve account Tron DAO said Saturday afternoon.
“[Tron DAO Reserve] has done its job,” tweeted Tron founder Justin Sun this weekend.
Decentralized, Algorithmic and Centralized: The Quest to Perfect Stablecoin Continues
While decentralized and algorithmic stablecoins sound good in theory, there are concerns and doubts about whether or not they can maintain a stable peg as long as they exist. Of course, some centralized stablecoin projects in the past have failed, and Makerdao’s decentralized stablecoin DAI was tested during the ‘Black Thursday’ event on March 12, 2020. Prior to the March 12 event, Bennett Tomlin’s blog post predicted the Ethereum (ETH) price stress that could affect the DAI USD parity.
In November 2020, the issuer of stablecoin OUSD, Origin Protocol, suffered an instant lending attack and the coin temporarily lost its peg. During the first week of April, the Waves-based neutrino stablecoin usd (USDN) temporarily dropped from the dollar. A year ago in April, the fiat value of the stablecoin fei usd (FEI) dropped below one dollar for a short period of time. So far, several of the projects mentioned above have recovered shortly after the parity loss, and stablecoin projects have maintained a stable parity ever since.
The Tron DAO Reserve purchase of 504,600,250 TRX was worth $38.99 million at the time of liquidation. The TRX purchase also follows the recent acquisition of $1.4 billion worth of bitcoin (BTC) by Luna Foundation Guard (LFG). The non-profit LFG now holds 80,394 BTC and $100 million worth of AVAX to protect UST. In addition, Tron DAO has partnered with three crypto institutions that are now whitelisted Tron DAO Reserve members. Tron DAO Reserve’s institutional partners include Poloniex, Alameda Research and Amber Group, while Tron DAO Reserve acts as the “initial custodian” of USDD.