Mr. Sun also shared a letter to the Tron and USDD communities highlighting a roadmap in which the stablecoin project aims to learn from UST’s collapse. He explained that there is still potential in decentralized stablecoins, and Terra’s dramatic ascent inspired the creation of USDD.
He added that, unlike Terra, the Tron blockchain hosts the highest supply of USDT. The Tron blockchain has achieved enormous success and adoption in its DeFi ecosystem by focusing on the liquidity and adoption of stablecoins. Furthermore, USDD will be overcollateralized. He said:
USDD will be a new decentralized stablecoin fully backed by a combination of stable and volatile assets. Initially, USDD will be over-collateralized by high-quality and low-volatility assets, including USDT, USDC, and BTC.
The collateralization rate is currently in the 180-200% range. By increasing the USDD supply slowly, we will be cautious with expansion.
USDD Will Learn from TerraUSD (UST) Collapse
Moving forward, Justin Sun cited the following lessons from UST’s collapse to help in USDD’s stability.
Inorganic and unsustainable growth is bad – USDD will initially have a supply cap of 2 billion, which will be lifted in Phase Two using a time-based staking mechanism. Its long-term cap will further be decided by trading demand.
Transparent over-collateralization is critical in preventing depegging – The Tron DAO will strive to design its reserve plans such that USDD is over-collateralized by a basket of fiat-collateralized stablecoins (such as USDT and USDC) in addition to Bitcoin, Tron and other assets.
USDD will Expand to Other Chains Beyond Tron
In his concluding remarks, Justin Sun mentioned plans for USDD to expand beyond the Tron blockchain. He said:
Our aim is for USDD trading pairs to have more liquidity than USDT or USDC on both centralized and decentralized exchanges.
We want USDD to be the new settlement currency of crypto. To enable this, we will focus on liquidity, while making sure USDD has ample reserves.
As the industry moves closer to a cross-chain future, USDD will also expand to support multiple chains. We’re currently active on TRON, BNB Chain, and Ethereum, with plans to expand to many others in the near future.