Tron Explained: USDD Losing Peg as TRX price slumps

Tron-coin
Photo credit: Aetsoft

 

In the last few weeks TRON and USDD stand as some of the most searched and talked about topics worldwide. So if you are wondering why TRON is getting so much attention, this article will help you understand what TRON (TRX) is and why people are excited about it.

What  is Tron?

Tron is a blockchain-based operating system founded in 2017 by Justin Sun, the CEO of the Tron Foundation with plans to eventually rival Ethereum in terms of functionality. After its acquisition of BitTorrent in 2018, Tron’s popularity soared to new heights.

Tron is a decentralized, layer-one open-source blockchain-based operating system that offers similar functionality to Ethereum. These include smart contract functionality, a native cryptocurrency called TRX, and uses the delegated proof-of-stake mechanism to achieve consensus on the blockchain.

Tron aims at decentralizing the web through utilizing smart contracts to allow developers to create DApps (decentralized applications). As their acquisition of BitTorrent suggests, the Tron network has a focus on media and entertainment.

At the time of writing, the TRX network had garnered over 99 million accounts and had facilitated 3.4 billion transactions. It currently ranks 14th place among the world’s top cryptocurrencies in terms of market capitalization. The TRX token is also listed on most major exchanges such as Binance, FTX, and Kraken.

 

How does Tron work?

Tron works through a decentralized system. This means that no single entity controls all of Tron’s activity. Instead, the blockchain employs a proof-of-stake model to achieve network consensus. Tron’s infrastructure makes use of smart contracts to enable developers to create their own DApps, as well as coins or tokens, for use on the network.

Tron’s main native token, TRX, serves as the foundation for these newly created tokens. Thereafter, content creators can earn an income on the network when users directly reward their efforts using the TRX token.

Currently in the works is a network development plan to support gaming applications. Users would ideally create decentralized gaming applications while gamers directly reward the creators with the TRX token when they enjoy their game.

The TRX token is a store of value that can be invested in or traded for other cryptocurrencies. TRX is frequently used by users to create and interact with DApps on the Tron network. You can, however, lock away some of your TRX tokens to gain power, bandwidth, and energy.

The more ‘Tron Power’ you have for a longer period of time, the more likely you are to achieve higher status and have voting rights on the Tron blockchain network. Meanwhile, bandwidth and energy is used for transferring assets and running smart contracts on Tron.

Tron’s Features

Tron has a lot of things to offer that got people interested. For starters, it offers feeless network transactions up to a certain limit which is renewed every 24 hours. That’s right – no more expensive transaction fees eating into your profits.

In today’s crypto world, high gas fees are an unpleasant experience. However, with Tron, users can enjoy up to 2000 rapid and feeless transactions per second! Compared to Ethereum’s, 25 transactions per second, and Bitcoin’s, 3 to 6 transactions per second, this is no small feat to achieve! With the high scalability and smart contract-based functionality of the network, developers have a plethora of options for developing their apps.

Like other smart contract platforms, the Tron’s network also allows for the creation of DApps (decentralized apps), but has a particular focus on developing a creator economy. As we move towards a decentralized web3 internet, Tron’s rapid, feeless transactions combined with an open-source network for developing DApps helps bring this vision a lot closer to home.

Lastly, Tron directly supports content creators and their work. This means that if you’re a content creator, you can earn rewards for your work on the Tron network. This is important because it allows content creators to monetize their content without having to worry about third-party intermediaries like Youtube, Spotify, and  iTunes.

Users on the decentralized network can directly compensate artists in TRX tokens or other newly created tokens backed by TRX. Most recently, Tron also launched an algorithmic stablecoin, USDD, similar to Terra’s UST, which is the main source of the recent hype around Tron.

We’ll get more into USDD in a little while. Tron Integrations / partnerships While many blockchains offer smart contract functionality, Tron does have some interesting partnerships under its belt. Samsung, for instance, is releasing new phone models that include access to Tron DApps via the Samsung app store.

This is a giant tech manufacturer that further exposes Tron’s to larger markets around the world. Metal Pay, an online payment service, has TRX tokens integrated into their website and app, where users can buy the tokens more easily with cash.

On the other hand, allows gamers to earn TRX through streaming and viewership. There are many other institutions adopting Tron’s use cases, thus bringing to light the huge potential Tron, and other blockchains, could have on a decentralized internet.

 

What is the USDD coin?

On May 5, the Tron network launched a new algorithmic stablecoin, USDD whose value is meant to be pegged to the US dollar at a 1:1 ratio. The algorithm behind USDD is similar to the one of UST-LUNA, using the arbitrage opportunities between TRX and USDD to maintain its peg.

When USDD’s price is lower than $1, users and arbitrageurs can send 1 USDD to the system and receive $1 worth of TRX. When USDD’s price is higher than $1, users and arbitrageurs can send $1 worth of TRX to the decentralized system and receive 1 USDD.

Terra Scandal

You’ve probably heard about Terra’s massive cryptocurrency scandal, where their UST stablecoin sharply fell below the $1 peg in May 2021, leading to the downfall of the Terra blockchain and their native LUNA token. To prevent this from happening Tron’s CEO Sun, announced that they are over-collateralizing the USDD.

According to the TRON DAO’s website, USDD currently has a circulating supply of about $723.3 million, and purportedly has a collateralization ratio of 279.80%. It is worth noting that this figure includes the TRX burnt to mint USDD, as well as TRX itself in its reserves.

At the time of writing, Tron’s DAO has reserves worth $816 million. That includes approximately 14,045 BTC ($424 million), around 1.9 billion Tron ($152 million) and 140 million USDT ($240 million), which is intended to be used to defend USDD’s peg in the case the algorithmic pegging mechanism fails.

At the time of writing, USDD is slightly off-peg, trading at $0.99 Outro Having to go through third party organizations like Youtube, Facebook, and Instagram has been a major challenge for the content creation industry. Especially since these third party organizations take up a large portion of the profit, leaving content creators with little compensation for their efforts.

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While other blockchains have been addressing this issue for some time, Tron is the most popular blockchain that is focusing all of its efforts on digital content sharing. Through Tron, users directly pay artists in digital assets via their native token, TRX, which can be exchanged for other popular cryptocurrencies like USDD, bitcoin, and eventually traded for actual cash.

That’s all there is to know about Tron and its environment, guys! Will you soon make a TRX investment? Please share your opinions with us in the comment section.

Disclaimer: You should always take caution when dealing with decentralised applications, conduct your own research, and consult your financial advisor before making any crypto investments.

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