Tron’s USDD (TRX) now over-collateralized to avoid a Terra-like scenario (LUNA)

TRON’s USDD now over-collateralized

While the shadow of theUST failure still hovered over the USDD, the 2 stablecoins operating through a similar algorithmic structureTRON (TRX) reviewed its model and decided to over-collateralize the USDD in order to avoid suffering the same fate as Terra (LUNA).

L’USDD arbitrage is provided by TRXthe native token of the Tron ecosystem, in the following way: when the USDD deviates from its peg (benchmark) of 1 dollar, the automatic stabilization mechanism is triggered.

If the USDD drops below its value of 1 dollar, then USDD will be exchanged for 1 dollar of TRX in order to be burned, which will cause the number of units of USDD to drop in circulation. However, the cataclysm recently caused by the infernal spiral of LUNA and UST showed us that this model had major flaws.

So many reasons for Tron to review USDD structuring in order to take the lead, but also in order to (re)gain the confidence of investors. While the number of USDD currently in circulation represents around $668 millionthe latter are currently collateralized (insured in an equivalent reserve) up to 225% with this new model.

According to the announcement posted on Twitter, Tron’s new policy is to collateralize the USDD at least up to 130%based on a new strategy.

👉 Find our file on the consequences of the collapse of the Terra ecosystem (UST / LUNA)

A hybrid reserve strategy

According to the website of Tron DAOthe organization responsible for insuring the USDD peg, the stablecoin will now be newly insured (at present) with 14,040 bitcoins (BTC), 240 million USDTand about 1.9 billion TRXwhich is approximately $146 million at current prices.

Justin Sunthe founder of Tron, did not fail to celebrate the event on Twitter:

“Congratulations to USDD becoming the first over-collateralized decentralized #StableCoin! The real-time collateral ratio is now over 200%! A total of $1.37 billion in assets backs the outstanding USD 667 million. »

In an interview with our colleagues at Bloomberg, Justin Sun said the change in USDD strategy was already in the cards, but the Terra-related events precipitated decision-making :

” It was [déjà] part of the plan, but Terra/Luna definitely accelerated and prioritized this for our team. We want USDD to be over-collateralized, which I think will make market participants more comfortable using us in the future. »

TRX has seen progress since June 4, with a current price of $0.08, in a generally uncertain market environment. The TRON token currently sits on the 13th place of cryptocurrencies in terms of market capitalization, with $7.6 billion.


4 Day TRX Price

The USDD occupies the 9th place on the stablecoin podiumbehind Neutrino’s USDN and ahead of EIF.

So it remains to be seen how the market and the community will react to the newswhich objectively can only bring additional security to an algorithmic system that seemed to be able to present flaws just by its nature.

👉 On the same subject: Tron (TRX) becomes the 3ᵉ DeFi blockchain thanks to its algorithmic stablecoin

Sources: Tron DAO Reserve, CoinGecko, Bloomberg, TradingView TRX/USD

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About the Author : Maximilien Prue

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Passionate about the world of decentralized finance and the novelties brought by Web 3.0, I write articles for Cryptoast to help make the blockchain more accessible to everyone. Convinced that cryptocurrencies will change the future very soon.
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