On May 12, Tron blockchain creator Justin Sun announced via Twitter that traders can now earn rewards for depositing USDD into the Tron-based JustLend lending protocol.
USDD is an algorithmic stablecoin recently launched by Tron that is designed to work like the UST. Users will earn profits in both USDD and JUST stablecoins for depositing USDD.
JustLend is a Tron lending protocol similar to Compound on Ethereum. However, whereas Compound currently offers APY rates in the low single digits, JustLend is advertising rates as high as 30% — though JUST also mentioned 70% earnings, and the rate has been shifting during the day. (Tron reps have yet to react to a request for comment on how the yield works from Decrypt.) That’s around 10 to 20% points higher than Terra‘s own lending protocol, Anchor, was offering when a liquidity problem caused a bank run that brought the network down.
Tron’s move is similar to Terra’s, at least before its native token LUNA and stablecoin UST free-fall.
Last month, Justin Sun announced the user-controlled Tron DAO that makes governance decisions about the network will begin issuing a decentralized stablecoin backed by TRX. Sun wrote at the time:
“When USDD’s price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX. 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.”
That’s exactly the same system that Terra uses.
But Sun and Tron have a backup plan, just like Kwon and Terra. While Sun was unveiling USDD, Tron DAO revealed that it was looking for $10 billion in assets to deploy as a reserve in the event of a financial crisis. The Luna Foundation Guard set the same goal for its reserve. Terra, in fact, was only able to raise $3 billion in Bitcoin, Avalanche, UST, and LUNA. And it wasn’t enough to prevent the demise of a $18 billion stablecoin and a $30 billion network token.
From the very beginning, Tron and Sun were evaluated as “derivative products.” Many observers have pointed out that Tron’s whitepaper is suspiciously similar to Ethereum’s whitepaper. Tron’s expansion into DeFi in 2020 also bears many of the hallmarks of Ethereum. Justin Sun said in October 2020:
“We are creating the same kind of DeFi ecosystem as Ethereum, all the Ethereum network products, you can see a same version of Tron products. For example, the MakerDAO on Tron is called JustStable, created by the JUST team. And UniSwap is called JustSwap.” (The team behind JUST, which also created JustLend, is unnamed.)
There were many people waiting to laugh at this outcome due to Justin Sun’s reputation for mismanagement of the software company BitTorrent and the exchange Poloniex he owns. Moreover, so far, he has not escaped the label of “copycat.” But maybe they shouldn’t.
While the effects of this month’s crash are inevitable, Tron weathered the storm better than most. It currently ranks 14th in market capitalization among all cryptocurrencies, between Wrapped Bitcoin and Shiba Inu, with a capitalization of $7.3 billion.
Currently, USDD has a much smaller cap at $271 million in circulation but has surpassed Gemini Dollar (GUSD) after only launching last week.
After all that happened, Terra wasn’t strong enough to withstand the storm. If Tron continues to try to develop and test USDD without success, there will be no good recovery strategy for Sun to follow. Will Tron follow in Terra’s footsteps?
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