IN-DEPTH: CoinDesk’s 0x_bae chats with justinsuntron about Tron’s new algorithmic stablecoin, the LUNA/UST unravel, and the current state of the crypto market.
Despite UST’s unraveling this past week, Sun is confident Tron’s $USDD will ultimately prove successful.
When we designed USDD, we focused on the healthy growth of USDD. We want to keep our USDD market cap relatively small compared to TRX and total market cap. And also at the same time, smaller than the Tron DAO Reserve.Sun: We acquired BTC, USDT, USDC TUSD and other stablecoins. Sun: We haven't finalized the list but I think the main two we are buying right now are BTC and TRX. But we will consider other stablecoins and tokens in the future.Sun: I think half will be in stablecoins. Mainly USDT and USDC, around $2 billion each. We also hold other stablecoins, like BUSD, DAI, and TUSD – altogether around one $1 billion. The rest mainly is bitcoin plus TRX.Sun: I think bitcoin occupies like 80% of that.
So that’s why our reserve has different layers. We have stablecoins, which can be deployed immediately if anything bad happens, and then it can win time, and then we can gradually liquidate other assets if we need to. LUNA grew too fast, and they didn’t have time to build a good reserve fund to stabilize the market.
If you want to manage algorithm stablecoin liquidity, I will basically advise you to make changes in a good, healthy market. I think the Federal Reserve had their meeting one day before LUNA moved their liquidity, right? Those times are super sensitive, you don't want to do anything to mess up the liquidity at that time. So I think there's lots of details, you need to pay attention if you are doing an algorithmic stablecoin.
The second mistake, similar to the first, is because they grew in a very short period of time, they had no time to consider all the different variables in these very complicated markets. First of all, the liquidity - like when you should move the liquidity pool, how much money you need to put in the pool, how to build the Luna Foundation Guard funds.
Sun: It’s basically a marketing strategy, right? You get everybody involved to participate in the growth of the stablecoin. I think the yield should depend on the growth of the product. We still need to design a better structure on how to incentivize the community and how to incentivize the liquidity provider.
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