Key facts:
Tron Reserve acquired about 1,800 BTC this Saturday, emulating Fundación Luna with UST.
The collateralization of the stablecoin USDD reaches 192% according to the DAO that manages it.
Tron Reserve is continuing its plan to strengthen the Decentralized USD (USDD) stablecoin by buying bitcoin (BTC). To do this, he bought the equivalent of USD 50 million in BTC and Tron (TRX) in order to support the issuance of the recently launched cryptocurrency, which maintains parity with the US dollar.
The purchase was reported by the decentralized autonomous organization (DAO) Tron Reserve in a Tweet. In this way, reserves would exceed USD 700 millionalthough in the organization site the figure of USD 669 million still appears.
It happens that the amount still includes the 14,040 BTC reported by CriptoNoticias a week ago. Adding the USD 50 million in bitcoin acquired yesterday, the amount would rise to 15,836 BTC.
The amount of reserves in the stablecoin Tether (USDT) has varied since the last publication in this medium, since it went from USD 240 million to USD 140 million.
Tron’s goal is to maintain USDD collateralization at a percentage above 130% in order to ensure that the stablecoin always has the necessary backing, as described in the project white paper. This strategy is called “overcollateralization”.
To achieve this, they use an algorithmic method and create a reserve to use in cases of emergency. This reserve is made up of bitcoin and other crypto assets that allow USDD to maintain parity even in the face of unforeseen unfavorable circumstances.
To the algorithm to preserve parity, which emulates the price of various assets so that the stablecoin maintains the expected equivalence, the burning of TRX, the other cryptocurrency of the network, is also added. To issue USDD, an equivalent amount in TRX must be taken out of circulation.
At the close of this article, the collateralization of the stablecoin reaches 192%, taking into account the two factors mentioned. The current supply of USDD is 723,321,764 units. The first phase of the project’s roadmap, which will run until October 2022, contemplates a maximum issuance of 2,000 million USD.
Tron buys BTC, as Fundación Luna did with Terra
Terra, the developer of the network of the same name and the failed stablecoin terra USD (UST), he also bought bitcoins to support his main project. Regularly, this newspaper has reported on recurring purchases of the cryptoactive by the Luna Foundation.
However, the debacle of UST and the other Terra cryptocurrency, LUNA, could not be avoided even with the sale of the millionaire reserves that the organization had.
As explained in previous publications of this medium, Tron’s model is strikingly similar to the one used by Terra. First of all, it is also an algorithmic stablecoin. This means that it does not have a direct support in other assets for its issuance, but rather it is regulated based on algorithms that emulate the price of these.
Also, USDD is issued from the burning of TRX. The same thing happened with UST, which was broadcast burning LUNA. And thirdly, the aforementioned reserves, managed by Fundación Luna and Tron Reserve and that include both bitcoin and other cryptoactives to avoid the depeg (parity loss) of the stablecoin at times of excessive selling pressure.
Even the leaders of each project have a similar profile. Justin Sun, the lead developer of Tron, has been criticized for Some comments with a certain “sly” tone regarding other cryptocurrencies on his Twitter account.
Do Kwon, the leader of the Terra project, had the same profile, and more than once he made fun of other projects and cryptocurrencies on social networks. He even said in one interview that “95% of cryptocurrencies will die” and admitted that this is something “entertaining to watch”. Ultimately, that ended up happening with his own stablecoin.