An enormous amount of USDT has recently been moved to Binance exchange from an anonymous address. While community members started to panic, looking for who is behind the operation, the whale came out by himself and explained the nature of the transaction.
The transacted amount will be used as collateral for backing up the USDD stablecoin recently launched by Tron. Justin Sun announced that $100 million will be used for purchasing BTC and TRX, which will be used similarly to Luna and BTC in UST.
The scheme requires selling and buying of volatile assets for controlling the value of USDD algorithmic stablecoin. To attract more buying volume from investors and traders, USDD offers a high yield for anyone who is willing to provide liquidity for the stablecoin.
Following the Terra disaster, Sun faced criticism from investors all over the cryptocurrency community, especially after announcing that USDD will be backed with volatile assets in a manner similar to UST.
The main issue with the BTC and TRX backing concept is the volatile nature of a digital asset that can lose up to 50% of its value in a matter of days—if not hours. To maintain the balance and be able to hold the USD peg, USDD should maintain a relatively low capitalization that can be absorbed by the collateral behind it.
At press time, USDD's capitalization remains at $702 million, which can be covered with no problems by the Tron Reserve DAO. In the event that capitalization exceeds about $5 billion, TRON Foundation would need to increase the collateral behind the stablecoin to avoid Terra's UST and LUNA.
Alex Dovbnya
Yuri Molchan
Gamza Khanzadaev