Tron becomes the 3rd-largest DeFi blockchain due to new algorithmic stablecoin USDD

    31 May 2022

    Launched in 2018, Tron is now DeFi’s third-largest blockchain in terms of total value locked (TVL). Tron’s DeFi activity saw a sharp spike after the launch of its algorithmic stablecoin USDD, promising more than 20% per year returns.

    Currently, the TVL across Tron’s nine different apps stands at $5.9 billion, up 44% over the past month, according to data from DefiLlama. Tron now ranks third after BNB Chain and the industry leader Ethereum. Binance Smart Chain’s TVL stands at $10.8 billion, and Ethereum hosts over $93 billion.

    Moreover, Tron is the only blockchain to have enjoyed continued growth across all major networks, while Ethereum, Polygon, Solana, Avalanche, BNB Chain, and Fantom have double-digit losses over the past month.

    Tron’s surge has been mostly driven by the launch of its new algorithmic stablecoin promising double-digit returns, a scheme similar to the recently-crashed Terra stablecoin.

    Unlike Tether’s USDT or Circle’s USDC, USDD isn’t backed by anything and is instead governed by smart contract algorithms. The algorithm governing the stablecoin’s dollar-peg is an arbitrage trade between USDD and TRX, Tron’s network’s native token.

    Investors can always swap 1 USDD for $1 worth of TRX. If the price of USDD falls below a dollar peg, investors can buy the discounted USDD and swap it for TRX, pocketing the difference by selling the TRX tokens in the open market. And similar to Terra, USDD also promises investors more than 20% per year in returns across several Tron-based projects.

    The rate for USDD on JustLend, a Tron-native lending platform, is currently 23%. Elsewhere, on the stablecoin platform SUN, users can earn up to 64% for staking their USDD-TRX liquidity token.

    Given the high rates, many of these platforms have enjoyed a massive spike in activity. According to DefiLlama, JustLend’s TVL increased tremendously from $1.79 billion to $2.86 billion in less than a month.

    Other protocols on Tron, including JustStables, SunSwap, and, also saw a sturdy increase over the past month – their TVL jumped 15%, 6.18%, and 140%, respectively. It’s still too far from the size of Terra’s UST, but USDD’s market capitalization is also growing fast.

    According to CoinMarketCap, USDD currently has a total supply of 601 million tokens, with a market capitalization of above $602 million, which is high up from the $90 million recorded during its launch day on May 5.

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