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Is Tron's USDD the next UST? with Justin Sun, Founder of Tron Network- Ep. 69

5.0 | by Lau Jun Sheng

Overview of the Tron Network  

  • One of the OG blockchains from 2017 

  • PoS Smart Contract platform 

  • Scalability advantage - Tron 2000 TPS; Ethereum 15 TPS 

  • Largest blockchain for Tether transactions  
     

Podcast Summary / Notes 

Why Tron?

  • Tether transfers through Omni Layer were very slow and expensive

    • 15-30 mins; 50-100 USD fees per transaction

    • A heavy burden on the BTC blockchain 

    • Max 3,000 transactions per day 

    • Lacked smart contract functionality 

  • Migrated USDT from Omni to Tron 

    • 2-3 million transactions per day on Tron 

    • Cheap transaction costs 2-4 TRX ($0.2) 

 

Why USDD? 

  • Crypto lacks a decentralized stablecoin 

  • The majority of stablecoins are centralized

  • Problem with centralized stablecoins 

    • Possibility of redemptions being frozen 

    • Lack of transparency of balance sheet (USDT)

    • Wallets can be frozen as in the case of USDC

 

How will USDD avoid UST’s death spiral or bank run 

  • USDD uses a hybrid model inspired by other stablecoins 

  • LUNA and UST

    • USD Peg was only linked to the price of LUNA 

    • UST’s price is solely reliant on LUNA’s price which ultimately led to its death spiral 

  • USDD’s hybrid model takes advantage of all stablecoins in the market to guarantee the decentralization and stability of the stablecoin 

  • Rolling out Peg Stability Module (PSM) mode 

    • Can use TRX and other stablecoins to mint USDD

    • Currently allows users to swap USDT and USDD 1:1 with 0 slippage

 

Collateral assets backing USDD 

  • USDD is transparently over-collateralized (see tdrr.org or usdd.io) 

    • Everyone can check the collateralized assets and ratio (300%) 

    • Collateralized assets include TRX, USDC, USDT, and BTC

    • In the future might expand into more assets 

  • Asking the community if they would accept ETH and other assets 

  • Will add ETH if community feedback is good 

  • USDD is expanding to other blockchains

    • Currently on TRX, BSC, ETH, Arbitrum, Polygon

  • Believe L1s have the strongest security and decentralization to ensure the stability of a decentralized stablecoin 

 

Bootstrapping liquidity 

2 Main components of bootstrapping liquidity 

  1. Decentralized Automated Market Makers 

  • Sun.io and Sunswap - $300M liquidity pool 

  • Uniswap and Curve (ETH) 

  • Pancakeswap (BSC)

  • Arbitrum, Polygon and other L2s 

  1. Centralized Exchanges

  • KuCoin, Huobi, OkCoin, Poloniex  

  • USDD with BTC, ETH, and TRX pairs subsidized to encourage trading

  • Healthy liquidity to attract users to trade stablecoins and other assets 

  • Built lending market - JustLend with ~$200M worth of liquidity 

  • Upcoming 

    • Collaboration with lending protocols on Ethereum and BSC 

    • Staking rewards/campaigns with stablecoin collaborations 

 

USDD Yield 

  • Yields are subsided by Tron DAO Reserve

  • Collaborated with Frax and Curve for yield structure 

    • Using CRV as a form of subsidy for USDD yield 

    • Collaborate with more parties to build USDD together 

    • Source of yield will also be diversified 

  • Yield is a good way to bootstrap token adoption

  • USDD competes against USDC and USDT

  • Advantages of decentralized stablecoins 

    • Cannot be frozen by central authorities

    • Do not require KYC

  • The backup and alternative to centralized money in case of censorship

 

USDD Depeg 

  • The market was fearful as every coin was in freefall

    • FUD was everywhere 

    • Easy to downplay USDD and TRX during such market conditions 

  • People believed USDD was the same as LUNA/UST 

    • Chose to borrow large sums of money to short TRX and USDD 

    • Some traders may have missed the LUNA/UST short; TRX/USDD is the second chance to short and make money 

  • Short position/ Open interest peaked over $1bn mid-June

    • For reference, TRX has a market cap of $7bn 

  • People paid 1000% APY to borrow for shorting TRX 

    • Funding rate of 1% every 8hrs - 3% per day 

  • USDD regained its peg after 2-3 weeks 

    • Traders had to pay funding rates and close positions after not being able to find profits from shorting 

  • Decentralized stablecoins gain more trust after surviving attacks, battle testing, and extreme fear

 

Tell us how much you like this article!
Vote count: 1
Lau Jun Sheng
Lau Jun Sheng

Jun Sheng is a research intern and is an avid gamer, degen, memer, sleeper. Follow the author on Twitter @jnshngl

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