$USDD is an over-collateralized, decentralized stablecoin pegged to the US Dollar, launched on the TRON network. In addition to TRON, $USDD has been bridged to a variety of blockchains, including BNB Chain, Ethereum, Fantom, Arbitrum, etc.
$USDD resolves short-term price fluctuations and cyclical price risks with its responsive monetary policy and mintage mechanism. The ultimate goal of $USDD is to foster financial inclusion by eliminating barriers to entry and keeping the system free from the “arbitrary impositions” of centralized authorities.
Because of $USDD’s decentralized nature, rather than being strictly pegged to the USD, its price hovers around the price of USD. The Tron DAO Reserve can self-stabilize the price of USDD against price fluctuations by adopting different monetary policies depending on market conditions. If the price of $USDD falls below the peg in the short term, users can burn their $USDD to mint $TRX (Tron’s native cryptocurrency) to help boost the price of $USDD at a rate of 1 $USDD in exchange for $1 worth of $TRX. When the price of $USDD is above 1 USD, users can send $1 worth of $TRX to the decentralized system to get 1 $USDD.
The main purpose of the establishment of the TRON DAO Reserve is to protect the blockchain industry and market, alleviate extreme and long-term downturns, and solve the panic problem caused by the financial crisis. The main function is to regulate the risk-free interest rate of stablecoins in TRON and other blockchain networks, regulate the market by releasing and tightening liquidity, protect the exchange rate stability of the centralized and decentralized stablecoins in TRON and other blockchain networks; formulate and implement monetary policy, exchange rate policy, assume the responsibility of the lender of last resort; keep and issue financial reserve assets from TRON, other blockchain networks and financial institutions, maintain the entire blockchain industry financial market stability and control the systemic risks of blockchain finance.
The May 2022 collapse of the Terra ecosystem, caused by the de-pegging of its algorithmic stablecoin $UST, was a chilling moment for the crypto industry and led to skepticism about the viability of stablecoins.
It was a case of falling dominoes. After Terra’s $UST stablecoin lost its dollar peg, panicked traders burned their $UST en masse to mint $LUNA, Terra’s native token. The problem is, only $100 million worth of $UST could be burned in exchange for $LUNA per day, according to Terra’s protocol. And so the value of $LUNA was hyperinflated until the coin was valueless—and $LUNA was the only collateral backing Terra’s stablecoin.
To avoid a situation like that, Tron’s $USDD is over-collateralized and backed by multiple cryptocurrencies, including $TRX, Bitcoin, and reserves of both Tron-based $USDT and $USDC.
