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TRON follows LUNA’s example – despite the Terra stablecoin disaster

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Of the Terra-Crash took the entire crypto market down last week – and all eyes were on it. Within a few days, one of the most valuable cryptocurrencies lost, LUNA and its related algorithmic stablecoin, UST, several billions of US dollars. They formed the basis of the algorithmic ecosystem Terra, which is now facing ruin.

Fired investors and Crypto stars like Binance CEO Changpeng Zhao are making serious allegations against Terra and its founder, Do Kwon. Some speak of the worst scam since Bitconnect from 2017. And wat about Justin Sun? Undeterred promoting the launch of his own algorithmic stablecoin, USD.

Despite the Luna crash, the 31-year-old still believes in the benefits of algorithmic stablecoins, he recently explained in a Interview with BeingCrypto. A month ago they decided to launch one themselves. The similarities to the Terra system are startling.

Terra’s stablecoin was not an isolated case

Terra used the cryptocurrency LUNA as a reserve to back its algorithmic stablecoin UST. If this fell below one dollar, traders could use UST to buy the cryptocurrency LUNA worth one dollar and thus make money on the arbitrage. This worked during a booming bull market — but not in a crash. Algorithmic stablecoins can enter a death spiral under severe market conditions.

Terra was not an isolated case. SafeCoin, BitUSD, DigitalDollar, NuBits, CK USD and Neutrino from Waves are some algorithmic stablecoins that lost their peg to the US dollar in the past, some of which fell into ruin forever.

TRON’s own stablecoin creation USDD is said to be through the cryptocurrency TRX be covered. They want to make the project palatable for small investors with high interest rates for staking USDD – up to 30 percent. Terra’s Anchor DeFi protocol was offering 20 percent before the crash.

This is how Tron wants to do it

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.

Justin Sun is not alone in his push. Also Cardano has its own algorithmic stablecoin, Djed launched a week before the crash.

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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.

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