Sun shines light on stablecoins

Justin Sun, the Tron founder, is known for his love of drama and dramatic gestures. This is the man who spent $4.5 million on a lunch with Warren Buffett and $28.5 million on a ticket to space with Blue Origin. So, any announcement from him tends to come with a big ticket price.

How about $10 billion? Five days ago, on 21st April, Sun published a blog post announcing that TRON DAO would be taking out $10 billion in collateral “to launch an algorithmic stablecoin and offer a 30% annual percentage yield to investors.” It will be called USDD and is supposed to launch on 5th May. Sun says it will be “the most decentralized stablecoin in human history.” 

In his blog, he writes that USDD will achieve full on-chain decentralization and “will not rely on any centralized institutions for redemption, management, and storage.” USDD will be pegged to TRON’s native cryptocurrency TRX and is managed by an algorithm that will keep USDD stable at 1:1 against the US dollar.

Unsurprisngly, crypto Twitter leapt into action. Branson Bollinger, a venture capitalist specializing in crypto, tweeted, “I wouldn’t go anywhere near it. There are so many super smart people in this space, so going anywhere near a project that has a questionable leader is just unnecessary.” Others were sceptical about the 30% APY. One called @Route2FI tweeted, “My first impression is that 30% APY seems way too high. I mean, look at Anchor Protocol. They’re struggling with 20% APY. How is Justin Sun going to sustain 30%?”

However, Tron has strength in the stablecoin space. Since it launched in 2017, it  has processed more than $4T of USDT transactions and has become the largest global stablecoin network.

Sun’s move comes at a time when we are seeing a surge in decentralized stablecoins. MakerDAO’s stablecoin DAI has a total value locked (TVL) of over $14 billion, and Terra’s UST has around $30 billion TVL.

Do Kwon, Terra’s CEO, who calls himself the “Master of Stablecoin” has also taken some major steps by pledging $10 billion in Bitcoin-denominated collateral for its own stablecoin earlier this year. His response to Sun’s announcement was to tweet, “Decentralized economies deserve decentralized money — every blockchain will run on dect. stables soon.” He later tweeted, “currencies are ultimately backed by the economies that use them, and the future is clearly opting to use decentralized and self sovereign stablecoin.”

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