The purchase of TRX by TRON DAO is to back the algorithmic stablecoin, to leverage a forex reserve that is similar to Terra’s UST reserve.
Terra’s UST reserve system is gaining popularity, and Tron’s stablecoin project is following suit. Tron’s algorithmic stablecoin project was reported on by Coinscreed, and the fiat-pegged crypto asset has since been officially launched. The project now has many partners as USDD is listed on Pancakeswap, Kyberswap, Sunswap, Sun.io, Curve Finance, Uniswap, and Ellipsis.
At the time of writing, there is approximately 211,245,005.49 USDD, according to tronscan.org. According to statistics, Uniswap version three (v3) is the most active exchange for buying and selling USDD on Saturday, May 7, 2022.
While the USDA’s market capitalization of $211 million is small in comparison to Terra’s UST ($18.7B), it has only been in existence for two days. While the terraced (UST) saw $990.3 million in 24-hour trades, the USDD saw $2.31 million. The market capitalization of the US is greater than that of the Gemini dollar (GUSD), which is $199.5 million.
The Tron DAO and Tron founder Justin Sun announced on Saturday that the team had purchased 504,600,250 TRX at an average price of 0.07727 per unit. Tron DAO Reserve account said on Saturday afternoon that the purchase will be used as a reserve asset to “protect the overall blockchain industry and crypto market.”
“[Tron DAO Reserve] has completed its mission,” Tron founder Justin Sun tweeted over the weekend.
Decentralized, Algorithmic, and Centralized — The Continous Move to Perfect the Stablecoin
Although decentralized and algorithmic stablecoins sound cool in theory, there are concerns and questions about their ability to maintain a stable peg for the duration of their existence. Some centralized stablecoin projects have failed in the past, and Makerdao’s decentralized DAI stablecoin was tested during the ‘Black Thursday’ event on March 12, 2020.
Maker Dao uses an over-collateralization (OC) process to secure DAI’s USD peg, and Bennett Tomlin’s blog post two years before the March 12th event predicted Ethereum’s (ETH) price stress that could affect DAI’s USD peg.
Origin Protocol, the OUSD stablecoin issuer, was hit by a flash loan attack in November 2020, causing the coin to lose its peg temporarily. The Waves-based stablecoin neutrino USD (USDN) temporarily deviated from the pegged dollar price during the first week of April.
In April of last year, the stablecoin few USD’s (FEI) fiat value briefly fell below a dollar. So far, a number of the aforementioned projects have recovered quickly after the peg was lost, and the stablecoin projects have maintained a stable peg since then.
At the time of settlement, the Tron DAO Reserve purchase of 504,600,250 TRX was worth $38.99 million. The TRX purchase follows the Luna Foundation Guard’s recent acquisition of $1.4 billion in Bitcoin (BTC).
The non-profit LFG now has 80,394 BTC and $100 million in AVAX to protect UST. Furthermore, Tron DAO has partnered with three crypto institutions, all of which are now whitelisted Tron DAO Reserve members. Poloniex, Alameda Research, and Amber Group are among Tron DAO Reserve’s institutional partners, and Tron DAO Reserve serves as USDD’s “early custodian.”