Hey folks, I am sure all of you have recently come across the news about the Terra Luna fiasco where the dollar-pegged algorithm stablecoin, UST had unpegged and failed. That was a horrific thing to experience, especially if you were an investor. However, if you look on the bright side, after the Terra Luna fiasco subsided, it cleared the spot for another project which is Tron and its new algorithm stablecoin, the USDD launched on May 5, 2022.
According to Defi Llama, Tron’s total value locked (TVL) across its own nine different apps currently stand at around $5.9 billion which when compared to last month is up by 44%. The only two chains currently ahead of it are Ethereum with a TVL of $93 billion and Binance Smart Chain with a TVL of $10.8 billion. Thus, making Tron, the third-largest DeFi Blockchain in the entire crypto sphere.
Not only this but also it seems Tron is the only blockchain to enjoy continuous growth across all major networks whereas, most other popular chains like Fantom, Binance chain, Avalanche, Solana, Polygon and Ethereum have shredded around double-digits during this current bearish times.
What is the reason for Tron’s recent bullishness?
Experts believe, the main reason for Tron’s recent bullish movement is solely due to the launch of its new algorithm stablecoin that has quickly taken the spot of the failed UST and has garnered the attention of investors as, like Terra, USDD too promises similar high annual returns of about 20% across the Tron ecosystem via multiple initiatives or schemes.
What is USDD and How is it different from UST?
First of all, UST was purely an algorithm-based dollar-pegged coin whereas, on the other hand, USDD is a very different type of dollar-pegged algorithm stablecoin. USDD follows an arbitrage trade concept between USDD and Tron’s native coin, TRX which ensures the investor’s an extra layer of protection just in case of a depeg scenario occurs.
For example, investors can always swap 1 USDD for $1 worth of Tron no matter what the USDD price is. Hence, if the price of 1 USDD goes under $1 for some reason, the investors can seize the opportunity to swap it for Tron at a discount (Arbitrage trading). This will not only provide investors with a sense of security but also will create an opportunity for them to profit from the arbitrage trading.
However, some experts have pointed out that USDD isn’t much different from UST and it has just as much chance of failing as UST did. Prominent critic, Bennett Tomlin said:
As far as I can tell $USDD is not an algorithmic stablecoin. The only interaction that the TRD members can do is to burn TRX to get USDD. I see no contract to go the other way, and no algorithm adjusting either mechanism, except that minting depends on oracle price of TRX
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Disclaimer: This article isn’t a piece of financial advice. DYOR before taking any action.