Tron is not going to abandon the algorithmic stablecoin USDD

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The Tron ecosystem will not abandon the algorithmic stablecoin USDD despite the collapse of UST and LUNA. In a conversation with CoinDesk, project founder Justin Sun said that the Terraform Labs product was ruined by too rapid growth and a lack of sufficient funds in the reserve fund.

“I still believe in algorithmic stablecoins. The crypto industry will develop and these assets should be there. We just need more complex and well planned structures. We think about things like leverage, growth and risk,” he wrote.

According to him, the Terra ecosystem did not collapse because the concept of algorithmic stablecoins is not viable. He explained that LUNA was heavily leveraged and had grown to an “impressive market capitalization” too quickly.

“During the development of USDD, we focused on the healthy growth of the instrument. We want to keep its market value relatively small compared to TRX and overall market cap. At the same time, it should be less than Tron DAO’s reserves,” Sun said.

In May, TRON DAO Reserve started buying BTC and TRX to back USDD. San said that DAO also acquired the “classic” stablecoins USDT, USDC and TUSD. In his opinion, the presence of these assets in the basket of the organization will quickly provide the liquidity necessary for the stability of the USDD in a volatile market.

“We have stablecoins that, if something bad happens, can be immediately deployed. This will help buy time, and then we can gradually liquidate other assets, if necessary. LUNA was growing too fast, they didn’t have time to set up a good reserve fund to stabilize the market,” Sun explained.

The founder of Tron also emphasized that he had nothing to do with the destabilization of the UST. According to him, the incident was not an “organized attack”, but was caused by a general market panic.

Sun noted that the Terra team should have lowered the Anchor protocol’s rate of return as UST rose. USDD stablecoin offers a yield of 30%, but this figure will be lower in the future.

“Essentially it’s a marketing strategy, right? You are attracting users to participate in the growth of the stablecoin. I think that profitability should depend on the growth of the product,” he said.

Earlier, Sun pledged $2 billion through TRON DAO Reserve to prevent USDD from losing its peg to the US dollar, as happened with UST.

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Source: Cryptocurrency

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