Avoid a repeat of the UST crash! Tron raises USDD reserves to over-collateralized

After Terra’s algorithmic stablecoin UST collapsed last month, TRON announced a plan on June 5 to significantly increase the funds used to support its stablecoin USDD, thereby avoiding the challenges faced by Terra stablecoins. trouble.

The first USDD, which is close to the replica version of the Terra algorithm stablecoin UST, was launched on the TRON blockchain on May 5. TRON founder Justin Sun said that USDD was originally designed to rely on algorithms to maintain a peg to the value of the U.S. dollar, and despite some backing guarantees, USDD will now be over-guaranteed.

Justin Sun said that a capital reserve consisting of cryptocurrencies and other stablecoins has been accumulated, and the minimum total reserve will be maintained at 130% of the USDD issuance. In a press release, TRON described such a guarantee ratio as “guaranteed” , and stated that the reserve ratio would be updated in real time on the TRON DAO Reserve webpage from June 5th.

According to the Tron DAO Reserve webpage and CoinGecko, the overall USDD supply is $668 million, and USDD currently has a collateralization rate of 206%.

According to TRON’s statement, the reserves, which include Bitcoin, Tether (USDT), and Tron’s TRX, are now worth $710 million, with assets backing USDD in circulation totaling $1.37 billion.

A TRON spokesperson said that these reserves currently contain 14,040 bitcoins, 140 million USDT and 1.9 billion TRX, as well as 8.29 billion TRX in burn contracts .

Justin Sun said: “The reserves we are utilizing are highly diversified, including Bitcoin and different kinds of stablecoins. USDC will be a part of our reserves, but only a small part of our reserves.”

Earlier, Justin Sun said in a recent interview: “This was originally planned, but the Terra and Luna events made our team accelerate and take this as a priority. We hope that USDD is over-guaranteed, and I think it will make market participants We will be more at ease about using it in the future.”

Justin Sun also said: “We want to upgrade USDD to a hybrid model. Therefore, on the one hand, we have an algorithmic stablecoin, and on the other hand, we have TRON DAO reserves.”

Algorithmic stablecoins have shown a troubled history. For example, both Neutrino and Basis have lost parity against the dollar.

The implosion of LUNA and UST last month has further triggered an impact on the cryptocurrency circle, which has been facing investment difficulties due to the Federal Reserve’s interest rate hike and high inflation. Bitcoin and ether have fallen more than 50% so far from their November highs, with many digital assets falling even deeper.

Justin Sun said in an exclusive interview last month that the collapse of Terra and LUNA gave other projects a chance to adjust, while USDD aims to raise $10 billion through TDR to defend its parity against the dollar.

TRON’s actions have allowed USDD to perform relatively well. At the end of April, USDD was the 24th largest cryptocurrency by market capitalization and has now moved up to 13th.

Justin Sun said his take on LUNA and UST is that the Luna Foundation is very passive and has a “very predictable” bitcoin buying and selling strategy, which makes it more vulnerable to attack.

“The Tron DAO will be very aggressive and less predictable in the market. To reassure the market without telling the market too much,” he said.