Financial

Tron network has launched USDD algorithmic stablecoin

Dated May 5, 2022, the blockchain network of TRON cryptocurrency gained support for its algorithmic stablecoin titled USDD. The developers of the project announced this on their Twitter page. 

The USDD protocol is designed to meet consumer demand for stable digital currencies by allowing them to make electronic payments with USDD. It uses TRX a native TRON coin and a $10 billion reserve in highly liquid digital resources to peg to the US dollar. 

USDD is another coin that has joined the algorithmic stablecoin list. This means that a USDD stable exchange rate is maintained by a special algorithm that is based on the market supply and demand for USDD. This algorithm, depending on the rate of conversion, burns or issues USDD and motivates market contributors to buy or sell the stablecoin. Simply put, as soon as the algorithm detects a deviation of the USDD price from $1.00, it burns or issues the coin, thus regulating its supply. When the price exceeds $1.00, the algorithm creates new coins, so that the supply of USDD boosts, and the stablecoin rate decreases. In case the valuing falls below $1.00, the algorithm burns the stablecoins, thus the supply decreases, and the rate grows up. Because of this, algorithmic stablecoins are more decentralized than other stablecoins that are backed by conventional money.

The USDD price of $1.00 is also endorsed by TRX, i.e. the native cryptocurrency of the TRON network. The USDD protocol uses TRX as the base currency to determine the USDD stablecoin price. If USDD falls below $1, Arbitrageurs and users can send USDD to the system and receive TRX worth $1. As a result, the algorithm will burn 1 USDD and issue TRX worth $1.00. The supply of the stablecoin will decrease until its price rises again to $1.00 and the balance between supply and demand is restored. If USDD becomes more expensive than $1, however, the supply of the stablecoin fails to keep up with demand. Participants send $1 worth of TRX into the system and receive USDD. As a result, the algorithm will issue 1 USDD and the TRX tokens worth $1 will be burned: the supply of stablecoin will increase until its price drops back to a US dollar. After that, users exchange $1.00 worth of stablecoins to TRX at the market rate and make a profit. 

At the same time, the crypto community has expressed its concern as USDD is copying the security model of the TerraUSD (UST) stablecoin, whose recent collapse shook the entire crypto market. Will USDD repeat the fate of its predecessor? TRON founder Justin Sun assured that he took into account all the mistakes of the UST team, therefore the stability of the new coin is not threatened. The USDD, however, lost its peg to the US dollar on December 11, 2022, and refused to recover. This was not the first time that stablecoin has decoupled from the US dollar. There have been several events when Tether (USDT) did the same thing. The difference, however, was that USDT recovery was quicker. In response to the unpegging, TRON founder Justin Sun assured that USDD collateral is 200%. He described USDD as the most decentralized stablecoin in the history of mankind. Sun even pledged to support a plan to help long-term UST holders with the smallest balance by giving them $10 million in the USDD equivalent. Thus, the main issue facing USDD right now is the loss of investor confidence in algorithmic stablecoins after the collapse of UST. This may affect the interest in USDD as well. Justin Sun himself is a controversial figure. He has often been accused of plagiarism, deceiving users, and financial fraud. Anyhow, no official accusations have been made.

In any case, the stablecoin is attracting a new wave of users to the TRON ecosystem. TRX cryptocurrency is among the top 20 coins by market accumulation. TRX is a prevalent token available for purchase in various ways: crypto exchanges, exchange services, P2P platforms, electronic payment systems, crypto wallets, etc. Tron is considered one of the most promising competitors of Ethereum. If you decide to diversify your crypto portfolio and conduct ETH to TRX exchange, the Godex crypto conversion platform will provide you with the most favorable and fixed rate, anonymity, and high speed.

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