Here’s what $100 million was spent on
A huge amount of USDT was recently transferred to the Binance exchange from an anonymous address. As members of the community began to panic, searching for who was behind the operation, the whale came out on its own 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 program requires the sale and purchase of volatile assets to control the value of the USDD algorithmic stablecoin. To attract more buying volume from investors and traders, USDD offers a high yield for anyone who wants 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 problem with the concept of BTC and TRX support is the volatile nature of a digital asset which can lose up to 50% of its value within days or even hours. To maintain balance and be able to maintain the USD peg, USDD must maintain a relatively small market 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.
