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USDD drives Tron's DeFi TVL surge and compares it to Terra Luna's UST

 


Tron is the third largest network by total value of completed transactions (TVL) in DeFi protocols a month after the launch of its algorithmic stablecoin USDD.


The Justin Sun-led protocol has seen TVL rise above $6 billion over the past 30 days, trailing BNB Chain's $8.8 billion and Ethereum's $71.3 billion TVL.


CoinGecko, a crypto data aggregator, identified the launch of its algorithmic stablecoin USDD as one of the reasons behind the massive increase in its TVL. USDD was launched on May 5th and its market cap is currently over $621 million.


This rapid growth has led some to draw a parallel between it and the TerraUSD, which collapsed last month. Before the collapse of UST, the stablecoin had reached a market cap of over $30 billion.


Many believe that the similarities between Tron's USDD and Terra UST are obvious as both are algorithmic stablecoins that rely on market arbitrage to maintain their value.


Tron-based protocols also offer significant returns, similar to the Anchor protocol in Terra's ecosystem. JustLend, which holds the majority of TVL, offers a 23% yield, well above the 19.5% that Anchor offered.


Another protocol, SunSwap, offers users up to 64% if they stake USDD-TRX liquidity tokens. These high returns have attracted users. JustLend's TVL rose to $2.98 billion on June 1 from $1.79 billion on May 1st.


Some critics have already said that USDD, like UST, will fail. Meanwhile, the value of TRX, Tron's token, has risen alongside TVL. According to Coincap data, TRX is trading at $0.082 after surging over 24% over the past 30 days.

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Justin Sun insists USDD can survive

In a recent blog post, Justin Sun revealed that USDD would learn from the epic case of Terra's UST. According to the post, USDD would always be overcollateralized by low volatility assets like USDT, USDC, Bitcoin and other digital assets.


Sun went on to say that USDD supply would be maintained in phases. In the first phase, those using the algorithmic stablecoin will receive a fixed interest rate of 30%, capped at 2B USDD.


In the second phase, those who choose to lock their USDD liquidity for a year would continue to receive a high APR, while those who lock their liquidity for a shorter period would receive lower rates.


He concluded that USDD will be extended to other blockchains as the industry grows. The stablecoin is currently active on Tron, BNB Chain and Ethereum.

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