Tron’s newly-launched USDD stablecoin has traded under a dollar for almost a week now, after slipping below its dollar peg on June 13.
USDD hit an all-time low of $0.9255 on June 19, before recovering to $0.9608 at the time of this writing, according to data from CoinMarketCap. It remains several cents shy of $1–the value it’s intended to be traded at.
On June 17, the Tron DAO Reserve claimed that USDD is not depegged, in a pinned Twitter thread. “USDD is a decentralized stablecoin that depends on an on-chain mechanism & collateralized assets,” the tweet reads. It goes on to argue that USDD differs from centralized stablecoins such as Circle’s USDC in not being attached to the dollar “in a very close spread by banking mint and redemption.”
(1/8) Q&A about #USDD
1. Is USDD depegged?
No. USDD is a decentralized stablecoin that depends on an on-chain mechanism & collateralized assets, unlike centralized stablecoin e.x. USDC, which is attached to USD in a very close spread by banking mint and redemption.
— TRON DAO Reserve (@trondaoreserve) June 17, 2022
According to Tron founder Justin Sun, USDD initially depegged as a result of short sellers targeting the network’s native token TRX on crypto exchange Binance. Despite Sun pledging $2 billion from the Tron DAO Reserve to fight the short sellers, USDD has remained stubbornly below a dollar. Earlier today, the Tron DAO Reserve announced that it has purchased 10,000,000 USDD in a bid to “safeguard the overall blockchain industry and crypto market.”
What is USDD?
Initially launched as a purely algorithmic stablecoin, USDD’s operating model was changed after Terra’s algorithmic stablecoin UST collapsed last month. The stablecoin now uses a hybrid model in which it’s backed by collateral including Bitcoin, TRX, USDT and USDC reserves.
The total value of all USDD coins issued by Tron is just over $723 million, the Tron DAO Reserve’s website states, and the currency has a backing ratio of 324%–backed by $2.3 billion in collateral.
The Tron ecosystem is the third-largest blockchain by TVL (total value locked), with just under $4 billion locked into smart contracts across its nine different decentralized finance (DeFi) protocols, according to data from DeFi Llama.
Its TVL peaked in mid-November of last year at $6.74 billion and reached $6.29 billion on June 8, dropping by 36% to $4 billion in just under two weeks amid a broader crypto market crash. Tron’s TRX token is currently trading at $0.061, down 1% on the day and over 20% in the past week.
“We foresee a very robust future ahead,” the Tron DAO Reserve wrote in a tweet dated June 17. “We’re only 42 days old, we still have numerous products to build and massive growth ahead.”