USDD

Justin Sun is the founder of the blockchain network Tron. Yesterday, he announced the launch of a new, algorithmic stablecoin called USDD.

Tron USDD's launch follows the breakout success of other stablecoin projects such as MakerDAO's DAI and Terra's UST. UST currently has a market cap of over $18 billion, and the market cap of DAI is currently hovering at just over $9 billion.

We've been over stablecoins before and we've been over the most popular algorithmic one too, UST. Sun's new stablecoin USDD will be issued on top of the Tron network. In fact, the mechanics of USDD are very similar to the system that underpins UST. The stablecoin will be backed by $10 billion worth of crypto reserves to start with. Sun's blog post says:

"USDD will be pegged to the underlying asset, TRX, and issued in a decentralised manner. When USDD’s price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX."

So to expand on that - if the price of USDD goes below $1, let's say to 80 cents, traders know they can send 1 USDD and receive $1 worth of TRX in return. They are sending 80 cents and receiving $1, so they will do this as many times as they can. This will reduce the supply of USDD since everyone is sending their tokens back, and increase the supply of TRX since everyone is receiving them. So the price of USDD will go up until it is worth $1 worth of TRX again.

A UST Copy?

Many on Twitter accused Justin Sun of copying UST. In response, Do Kwon, the founder of Terra Luna and the UST stablecoin, had this to say:

"This should be obvious but – The more carmakers go electric, Tesla wins...Similarly, the more blockchains issue their own sovereign stablecoins, UST wins. The true moon will be found in helping as many communities become self sovereign as possible".

So a green light from Terra Luna's megaboss.

High Interest Rates

Justin Sun mentioned in a tweet that the interest rate you could earn on USDD would be 30%, which is a high interest rate for a stablecoin, which is in theory a much lower risk asset to hold than other crypto assets. This high interest rate is no doubt in place to encourage adoption of USDD.

Quite a lot of movement in "stable"coins

There is lots of buzz around the stablecoins space right now. There were even reports of Near Protocol launching their own algorithmic stablecoin. So even though the coins are meant to be stable, the industry might be exciting for a while to come.