Justin Sun, the CEO of Tron network, has recently announced that his firm’s stablecoin, USDD, is safer and more secure than UST. He added that the stablecoin does not have the same risks that crashed Terra’s UST.
USDD Is Safer And More Stable Than UST
According to his statement, USDD has multiple backing assets and an over-collateralized reserve. He claimed these features and more make USDD more superior and stable than UST.
UST, Terra network’s stablecoin, lost its dollar peg on May 9 and caused the devaluation of its sister coin, LUNA. The occurrence eventually led to the collapse of the entire Terra ecosystem.
Ever since Terra’s crash in May, the entire crypto market has been in disparity. Many projects faced liquidation; some went insolvent while others struggled to stay aloft.
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Consequently, many investors believe most stablecoins are highly susceptible to risks. Furthermore, many analysts opined that since UST and USDD both have higher APY yields than others, they are somewhat bound to the same fate. However, Justin Sun disagreed with the assumptions as he explained the difference between the two stablecoins.
USDD Uses An Hybrid Price Pegging System Superior To UST’s
The CEO stated that LUNA was the only determinant of UST’s price, and users can only burn or mint UST via LUNA. However, USDD’s price stability depends on a hybrid model that uses price correlation between 4 different stablecoins.
Therefore, users can mint or burn USDD from/to USDC, USDT, and other two popular stablecoins. Justin continued that through the hybrid pegging mechanism, USDD is more secure and decentralized than UST.
In addition, the KuCoin exchange attested to Justin’s claims as it said USDD uses a decentralized price oracle. Reports also revealed that the Super Representative, who voted for the USDD rate in American dollars, supported the mechanism.
Like other algorithmic pegging models, when USDD is above $1, the mechanism allows swapping with $1 TRX/other cryptos. As a result, arbitrating the price difference would profit the USDD and burn the excess TRX to a normalized price. Equally, if USDD drops below $1, users can swap 1 USDD with $1 TRX, then the mechanism will burn USDD and push its price back to the $1 peg.
Justin Claimed USDD Has A Huge Collateralized Asset Support
Justin Sun also mentioned that USDD has collateralized asset support, which overwhelmed the total USDD in circulation. As a result, there is sufficient liquidation to support users’ transactions. According to reports, USDD has an over-collateralized reserve of 300% of the total coin supply.
The reserve has an estimated $747.40M digital assets consisting of BTC, USDC TRX, and USDT, amounting to $2.3B. Justin concluded that USDD is never like UST as it has colossal liquidity support, and its minting/burning is via TRX and four different stablecoins.