Tron is going to have its own algorithmic stablecoin called USDD, which will be launched May 5, according to founder Justin Sun. announceon thursday
Stablecoin won’t work like traditional ones like Tether (USDT) and Circle’s USD Coin (USDC) use bank accounts. Instead, USDD uses the same stablecoin algorithm as TerraUSD (UST) and Frax Finance (FRAX).
Stablecoin will have a similar system to these stablecoin algorithms in order to maintain the value of the dollar. As Sun explains, “When the price of USDD falls below 1 USD, users and traders profit. Arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX, and when the price of USDD is above 1 USD the user and traders profit. Arbitrageurs can send 1 USD worth of TRX to a decentralized system and receive 1 USDD.”
The founder of Tron claims that this USDD algorithm will ensure stablecoin maintains the USD regardless of market conditions.
A decentralized autonomous organization (DAO) known as Tron DAO will bemanageBlockchain stablecoin and according to Sun Tron DAO will manage reserves at 30% interest rate.
(1/3)#TRON enters the decentralized stablecoin arena!
#USDD (Decentralized USD), a Decentralized Algorithmic Stablecoin will be launched on #TRON on May 5, 2022. pic.twitter.com/Iu79ClSlKQ
— TRON DAO (@trondao) April 21, 2022
Tron DAO will provide up to $10 billion in custodial reserves in highly liquid assets. To use as collateral for USDD, this is similar to the plan made by Terraform Labs founder and CEO Do Kwon to buy $10 billion worth of bitcoin to fund UST.
Sun did not specify which assets it would use as collateral. but said they would be “A highly liquid asset derived from the innovator of the blockchain industry,” the asset will be used as a reserve to help stablecoin peg against the US dollar.
Kwon also responded favorably to the announcement of Tron’s stablecoin by him.said “Decentralized economies deserve decentralized money,” he added, adding that soon all blockchains will operate on these decentralized stable currencies.
As announced by Sun, USDD will be available on the Ethereum and BNB Chain at launch via the BitTorrent cross-chain protocol.
Sun explains that the expansion in USDT transaction volume on the network shows the need for USDD as a stable currency, with USDT on Tron being popular with traders who want to take advantage of arbitrage opportunities without compromising. Too many transaction fees have to be paid.
refer : LINK
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