Key Insights:
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The new stablecoin will be launched on May 5 into an already crowded market.
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USDD will be backed by Tron’s native token, TRX.
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Stablecoins now represent 10% of the total crypto market capitalization.
Tron network founder Justin Sun announced that the network would be launching a new decentralized algorithmic stablecoin called USDD.
On April 21, Tron founder Justin Sun wrote an open letter to the Tron DAO (decentralized autonomous organization), outlying his plans for a new stablecoin project.
In the announcement, he stated that USDD would be launched on May 5.
Sun added that the new token represents an evolution from previous Tether (USDT) stablecoins that ran on the Omni and Tron networks (he failed to mention Ethereum, which powers around half of the Tether supply). Tron’s USDD will usher in the “stablecoin 3.0 era,” according to Sun.
The new stablecoin will be backed by Tron’s native token, TRX, as Sun explained:
“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. When USDD’s price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD.”
USDD will be issued on Tron, Ethereum (ETH), and BNB Chain.
A Crowded Market
The stablecoin market has become very competitive over the past year, and Tron’s new baby will be entering a crowded ecosystem. The success of Terra and its algorithmic stablecoin UST has no doubt spurred the decision.
Algorithmic stablecoins work on the underlying principle of supply and demand to maintain price stability. The crypto collateral that backs them is supplied and removed to maintain its peg. Terra’s UST works by minting and burning LUNA tokens to keep the coin as close to $1 as possible.