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The new stablecoin will be pegged to the TRX token, and stability will be maintained with the aid of mathematics and algorithms.
In an open letter to the Tron community, founder of the blockchain protocol, Justin Sun announced the launch of Decentralized USD (USDD) an algorithmic token that is billed to usher in the Stablecoin 3.0 era. Per the announcement, the USDD stablecoin will not rely on any centralized reserve asset provider, rather its reserve will be under the control of the Tron DAO, a new organization that was established to help inject stability into the digital currency ecosystem.
The emergence of the USDD stablecoin highlights the evolution of dollar-pegged tokens from 1.0 which characterizes the Omni era in which all stablecoin with no blockchain is built on the Bitcoin network. Transactions involving these types of stablecoins take an average of 30 minutes and fees could be as high as $100 per transaction.
This first evolution was succeeded by the stablecoin 2.0 era marked by the emergence of Tron USDT. Significant progress was recorded with this iteration as the transaction was settled in a matter of seconds, with fees at or less than $1. From the 200,000 transactions per day associated with Omni stablecoins, Tron USDT conducts as many as 10 million transactions on a daily basis, and since its introduction back in 2019, TRON has processed more than $4 trillion of USDT transactions.
With USDD, the bar is even bound to be raised higher on all fronts. However, the new stablecoin will be pegged to the TRX token, and stability will be maintained with the aid of mathematics and algorithms.
“In the Stablecoin 3.0 era, USDD will not rely on any centralized institutions for redemption, management, and storage. Instead, it will achieve full on-chain decentralization. USDD will be pegged to the underlying asset, TRX, and issued in a decentralized manner,” Sun wrote in the letter.
Tron DAO Stablecoin Stability Measures for the USDD
When the price of USDD is below $1, “users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX.” Conversely, when “USDD’s price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD.” At all times, the underlying protocol running the USDD stablecoin will keep the token pegged to the United States dollar through a set of well-defined algorithms in a decentralized manner.
The USDD stablecoin is on schedule to be released on the 5th of May and with the Tron DAO Reserve managing it, initial liquidity of $10 billion will be made available to power the transactions ongoing on the protocol. Besides its presence on the Tron Network, the USDD will also be floated on the Ethereum blockchain as well as the BNB Chain.
The roadmap of the USDD follows 4 different stages modeling human’s attempt to explore space, and these include stages 1.0 Space, 2.0 ISS, 3.0 Moon, and 4.0 Mars. With the launch of the USDD, Sun believes this will be Tron’s greatest contribution towards providing financial freedom for all since the introduction of Tron USDT.