Cryptheory – Just Crypto

Cryptocurrencies are our life! Get an Overview of Market News

Nothing learned from Terra Crash? Tron-DeFi explodes after stablecoin launch

2 min read

On May 2nd, 2022, Tron launched its own algorithmic stablecoin, USDD. Since then, its own DeFi ecosystem has experienced rapid growth. Despite the Terra crash and USDD’s similarities to the now-failed TerraUSD (UST).

According to data from DeFi Llama , total assets (Total Value Locked; TVL) of DeFi in Tron increased by almost 25 percent this month – to almost six billion US dollars. Tron now ranks third, right after Ethereum and Binance .

The network also grew by 1.5 million new users and now has nearly 100 million accounts.

Tron promises up to 30 percent “risk-free” interest for staking its algorithmic stablecoin. At Terra, you earned 20 percent via Anchor – and even there there is now talk of a house of cards whose collapse was only a matter of time.

When Terra crashed, the ecosystem went into a death spiral, fueled by the mechanics of its algorithmic stablecoin, UST. It lost 99 percent of its value. 

Total locked value in DeFi as a whole fell more than 50 percent year-to-date from around $250 billion to $112 billion, with a discernible plunge following the Terra crash.

Tron’s algorithmic stablecoin works almost exactly like Terra’s UST/

The big difference to Terra: USDD is said to have a much smaller market capitalization than the native cryptocurrency TRX. In the Terra system, before the crash, the ratio between UST and Luna was almost one-to-one, at just under $18 billion each. The future will show whether this form of over-collateralization is sufficient as a guarantee of stability for Tron.

What happens when the next stablecoin bomb bursts?

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

Leave a Reply