TRON has become the third-largest blockchain network by total locked-in value on the DeFi ecosystem after the launch of stablecoin USDD.
TRON’s DeFi ecosystem benefits from the new stablecoin, which has a very high-interest rate. According to data from Defillama, TRON’s DeFi ecosystem has grown by about 26% over the past month, rising from about $4 billion to $5.46 billion, surpassing other popular Layer 1 networks such as Avalanche and Solana to become the third-largest Blockchain in terms of total locked value, just behind Ethereum and BNB Chain.
TRON’s ecosystem has risen sharply due to the “hot” growth of the recently launched stablecoin, USDD, which has promised investors a 30% interest rate.
The USDD is designed to be a “cryptocurrency issued by the TRON DAO securities guarantee fund at“stable” prices through “ integrated incentive mechanisms and monetary accountability policies. ”
This mechanism allows the asset to “stabilize itself against any price movement,” similar to how Terra’s LUNA tokens and Bitcoin reserves were intended to stabilize the UST before it collapsed.
USDD “risk-free” 30% interest rate
The network founder raised controversy because Justin Sun had promised a 30% “risk-free” interest rate on the USDD. While it is unclear where Justin Sun derives this profit, the recent development of DeFi in the TRON ecosystem suggests that this incentive mechanism is intended to attract more users. Currently, the market capitalization of USDD is about USD 545 million.
Although the USDD has helped TRON thrive over the past few weeks, many still raise questions for TRON DAO. The reason is that USDD’s official “custodian” has not highlighted any risks associated with stablecoin and its new algorithm anywhere in official documents or public communications.
After all, the USDD behaves like Terra’s UST, which ended Terra’s ecosystem with a terrifying $40 billion collapse. During the collapse of Terra, when the UST began to devalue against the USD, it surpassed the capitalization of the LUNA, signaling that the failure was imminent.
If USDD continues to grow, it could soon surpass TRON’s $7.74 billion capitalization (TRX). Since TRX is supposed to support USDD, it could mean that this stablecoin will suffer the same fate as UST. There is a high chance that UST version 2 will become available if Justin Sun does not change the USDD model, which will go into Do Kwon’s “crash trail.”
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