Spurred by UST's Collapse Tron Overcollateralizes USDD

The implosion of Terra Classic’s algorithmic stablecoin UST has prompted Tron to reinforce the reserves backing its algorithmic stablecoin, USDD.

“We want to have USDD to be overcollateralized, which I think will make market participants more comfortable about using us in the future,” tweeted Justin Sun, the founder of Tron, a blockchain network supporting smart contracts.

Burning Contract

USDD launched on May 5 as an undercollateralized algorithmic stablecoin. But according to the Tron DAO Reserve website, it is now backed by more than $1.41B worth of assets, including 14,040.6 BTC (worth roughly $416M at current prices), 140M USDT, 1.9B TRX ($154M), and a further 8.29B TRX that resides in a burning contract ($703M).

With an outstanding supply of 703.3M USDD, the token records a collateralization ratio of 201%. The Tron team told Bloomberg it aims to maintain a minimum ratio of at least 130%.

Immediate Priority

Sun said the plan was always for USDD to become overcollateralized at some point, but that UST’s collapse has expedited the move to an immediate priority.

The fallout from UST and Terra Classic’s failure spilled over into the broader stablecoin markets. Rival algorithmic tokens were the hardest hit, with Near’s USN, Fantom’s DEI, Waves’ Neutrino USDN, and Binance Smart Chain’s VAI all losing their peg to the dollar last month.
Panic even hit centralized stablecoins, with fears regarding Tether’s controversial backing reigniting as USDT briefly lost its peg as users racing to redeem the token drove a $10B contraction in Tether’s supply.