UST’s algorithmic token, USDD, was launched less than a month ago and has already overtaken Terra’s UST in terms of total value locked in its DeFi protocols.
Although the DeFi market has been rather unstable since Terra’s collapse earlier this month, TRON’s ecosystem of decentralised apps is flourishing, at least in terms of total value locked.
With Defi Llama’s statistics, it seems that TRON’s ecosystem has increased by around 26% in the last month, going from about $4 billion in value to $5.38 billion in value today. As of this writing, it is the third-largest blockchain in terms of total locked value, following only Ethereum and BNB Chain. DeFi has lost about $90 billion in liquidity in the last month alone, with most top blockchains having their locked value plunge between 30 and 70% after Terra’s crash. Comparatively speaking.
The quick expansion of TRON’s freshly introduced stablecoin, USDD, which has guaranteed investors a “risk-free” 30% interest rate is most likely the cause of the spike in the ecosystem. A “cryptocurrency produced by the TRON DAO Reserve with a stable price” with a “built-in incentive mechanism and a responsive monetary policy” is the goal of USDD, according to its whitepaper. This system is supposed to enable the asset “to self-support against any price swings,” much to how Terra’s LUNA token and Bitcoin reserves were supposed to stabilise UST before it collapsed.
In the whitepaper, the similarities between Terra’s UST and USDD are obvious. When the USDD is trading below $1, arbitrageurs may exchange it for $1 worth of TRX. When the USDD is trading over $1, arbitrageurs may exchange $1 worth of TRX for one USDD, minting additional USDD and boosting the supply of the currency. Alternatively Theoretically, this technique aids in the price’s restoration to the $1 peg it was originally set at.
It is no coincidence that TRON Foundation has launched the TRON DAO Reserve, with the same objective of raising $10 billion in Bitcoin to safeguard the USD peg, as has Terraform Labs’ proposal.
Justin Sun, the polarising inventor of TRON, has pledged a 30% “risk-free” interest rate on USDD in an effort to get users to manufacture and stake the stablecoin. The recent spike in TRON’s DeFi ecosystem demonstrates that the incentive mechanism is functioning, despite the fact that the source of this output remains a mystery. The value of USDD has soared since its May 2 introduction, with a market capitalization of $545 million. There is a significant amount of USD supply locked in different DeFi protocols on the TRON network, with the majority of that supply making its way there.
It’s worth mentioning that the TRON DAO Reserve, which serves as USDD’s official “custodian,” has neglected to mention any of the hazards connected with its new algorithmic stablecoin in any of its official documentation or public communications. A death spiral event costing $40 billion brought an end to Terra’s UST, and it is possible that USDD may also meet the same fate. Terra’s fall saw UST overtake LUNA in market capitalization when it lost its dollar peg, indicating that the death spiral had begun. USDD’s $7.74 billion market value might be surpassed shortly if it continues to rise at this rate. Because TRX is meant to support USD, it’s possible that the stable coin may meet the same demise as UST, resulting in yet another industry-wide crash.
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