Justin Sun: TRON will not abandon its algorithmic stablecoin USDD

The TRON ecosystem will not abandon the algorithmic stablecoin USDD, despite the collapse of UST and LUNA. In an interview with CoinDesk, TRON founder Justin Sun said that Terraform Labs’ product was undermined by overly rapid growth and the lack of sufficient funds in its reserve.

«I still believe in algorithmic stablecoins. The crypto industry will develop, and these assets should be there. We simply need more sophisticated and well-planned structures. We’re thinking about leverage, growth, and risk», — wrote he.

According to him, Terra’s collapse was not due to the concept of algorithmic stablecoins being unviable. He explained that LUNA was heavily leveraged and grew to an “impressive market capitalization” too quickly.

«During the development of USDD we focused on healthy growth of the instrument. We want its market value to remain relatively small compared to TRX and total market capitalization. At the same time, it should be smaller than the reserves of TRON DAO», — Sun said.

In May, the TRON DAO Reserve began to buy BTC and TRX to back USDD. Sun noted that the DAO also purchased “classic” stablecoins USDT, USDC and TUSD. In his view, having these assets in the organization’s basket would allow for swift liquidity to support USDD’s stability in a volatile market.

«We have stablecoins that can be deployed instantly if something goes wrong. This will buy time, and then we can gradually liquidate other assets if needed. LUNA grew too fast; they didn’t have time to build a solid reserve fund to stabilise the market», — explained Sun.

The TRON founder also stressed that he has no role in destabilising UST. According to him, the incident was not an “organised attack,” but was driven by broad market panic.

Sun noted that Terra’s team should have reduced the yield on the Anchor protocol as UST grew. The stablecoin USDD offers a yield of about 30%, but this figure will be lower in the future.

«Essentially, this is a marketing strategy, right? You attract users to participate in the growth of the stablecoin. I think the yield should depend on the product’s growth», — he said.

Earlier Sun pledged to allocate $2 billion through the TRON DAO Reserve to prevent USDD from losing its peg to the US dollar, as happened with UST.

Recall that the launch of the algorithmic stablecoin on the TRON network took place in early May 2022 .

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