A new stablecoin called USDD is set to debut in the Tron (TRX) ecosystem on May 5. The concept for it mimics TerraUSD (UST), which has been met with caustic criticism in the crypto scene, among other details.
Tron (TRX) and its founder Justin Sun are once again causing frowns in the crypto industry. Because Justin Sun himself has announced the launch of a new stablecoin in the Tron ecosystem for May 5, 2022 with an open letter. This is to be called Decentralized USD (USDD) and its fixed 1:1 link to the US dollar is to be guaranteed by sophisticated algorithms. Such a concept is also being pursued at Terra (LUNA) with TerraUSD (UST).
Alex Krüger, a crypto expert with a wide reach, comments sarcastically on Tron and Justin Sun’s plan on Twitter. Tron had already copied Ethereum (ETH) down to the whitepaper when it launched in 2017 and is now repeating this tactic with regard to Luna, Krüger said. In fact, for Justin Sun, the copy-paste principle was in place when he founded Tron. But with USDD, moreover, similar questions arise as with TerraUSD, where the concept provokes million-dollar bets. Other stablecoins like Tether (USDT) or USD Coin (USDC) promise to ensure their stability through reserves in fiat and bonds.
The TRON blockchain was born by copying Ethereum, plagiarizing the Ethereum whitepaper word for word.
Now TRON is copying Luna's decentralized dollar. and faithful to its roots, the stages of the TRON stablecoin will be named Moon and Mars. Very original.
— Alex Krüger (@krugermacro) April 21, 2022
To ensure USDD is on a secure footing with Tron, $10 billion in reserves will be solicited from major crypto industry representatives, according to a release. Terra had most recently raised $1 billion for a new endowment, so it sees TerraUST as well equipped to handle unusual market situations. Critics say: if a stablecoin like TerraUST and in the future Tron USDD get into the situation that balances are to be paid out on a large scale, they can lose their stability and lose their value down to zero. This is because in practice, TerraUST uses a guarantee in LUNA for each new token or even each token that is redeemed, which could be on shaky ground in the stress test.
Does Tron even need new stablecoin?
TRX is currently listed close to the top 20 cryptocurrencies by market capitalization at around $6.5 billion, and Tron still ranks 7th in the DeFi growth space with $4 billion in deployed capital, according to data from DeFiLlama. In the Tron ecosystem, Tether (USDT) has been the dominant stablecoin so far. For Terra, its own dollar stablecoin in 2021 brought a breakthrough for major success in the DeFi space, where the ecosystem now ranks #2 behind Ethereum in terms of capital raised, with nearly $30 billion. Justin Sun and the Tron community apparently hope to use USDD to significantly increase their market share in DeFi.
Why is Justin Sun becoming active for Tron again?
So far, there are no known commitments from the crypto industry to contribute to the 10 billion fund for USDD. In any case, observers are puzzled that Justin Sun himself is beating the promotional drum. After all, Sun had taken up the position as ambassador for the island nation of Grenada at the World Trade Organization (WTO) at the end of 2021 and announced in parallel that he would retire from Tron. Most recently, Justin Sun was caught in the crossfire after investigative research accused him of a long list of illegal activities. Sun denies the searches, but has not provided any evidence to support his position.
Conclusion: Tron USDD a huge scam with an announcement?
Justin Sun promises a whopping 30 percent annual interest to early investors and supporters of USDD. The stablecoin will not only be issued in the Tron blockchain, but also in versions for Ethereum and the BNB chain. The interest will initially be made possible by Tron’s self-governance reserves, Sun said. It seems clear to him that the crypto industry is actually well supplied with differently designed stablecoins and a newcomer can only attract captal with above-average returns.
We think: The information available so far on USDD at Tron sounds attractive, but leaves many questions unanswered upon closer inspection. The notorious Justin Sun could set a project in motion here that risks many losers. 30 percent APR and $10 billion in venture capital for USDD just sound too good to be true.
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