Tron founder Justin Sun announced that he will be raising capital in USDD, the network’s stablecoin that was launched last week. USDD was one of the important sources that filled the stablecoin gap as the altcoin market fluctuated sharply due to the Terra effect. Now Sun says it will provide more liquidity to USDD.
Justin Sun announced that he will significantly raise capital in this new altcoin project
Launched in the past weeks, USDD is designed as an algorithmic stablecoin, similar to the mechanism of Terra UST and LUNA. Recently, he’s been talking about the USDD ending up like Terra. However, despite everything, it managed to reach among the top 100 by market capitalization. According to a spokesperson from the Tron team, Tron reserves include the following altcoin projects and amounts:
- Tether (USDT): 140 million
- Tron (TRX): 1.9 billion
- Bitcoin (BTC): 14.040
According to Justin Sun’s statements, Tron will use a balancing structure similar to Terra. In the last drop, we saw that this mechanism could collapse with excessive selling pressure. Pressed and bought to keep the UST price stable, the LUNA caused the price to drop further. It is thought that the mechanism can be protected with the high liquidity of Tron.
Are algorithmic stablecoins successful?
Stablecoins are designed to protect investors from the volatile nature of cryptocurrencies. These cryptocurrencies are usually pegged 1:1 with a fiat currency such as the dollar to ensure price stability. There are also different types of stablecoins, each of which uses different techniques to keep it stable with the currency it follows. Terra, for example, uses LUNA to stabilize the UST price. When the UST price drops, the price is stabilized by printing LUNA and buying the UST.
The reasons for the collapse of Terra as Cryptokoin.com we have discussed in this article.
What are algorithmic stablecoins and how do they differ?
Most stablecoins hold a 1:1 peg with the currency they track through a collateralized mechanism. Stablecoins in circulation are backed by cash or other assets to support the valuation of the stablecoin. For example, Tether (USDT), the largest stablecoin by market capitalization, is secured by off-chain assets such as cash (USD) and cash-equivalent bonds stored at a bank or other central institution.
However, it is not always possible to follow this approach as protocols must continue to add to their collateral stocks as stablecoin circulation increases. This is where algorithmic stablecoins come into the picture. Algorithmic stablecoins work a little differently. They usually do not have any collateral support and instead use complex algorithms to keep them stable with the fiat currency they follow. These algorithms can also incentivize and manipulate investor behavior to fix the price of the coin around the stabilizer
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